The Federal Trade Commission’s Bureau of Competition (FTC or Bureau) recently released a revised set of best practices for merger investigations. Despite the many similarities with previous guidance from the FTC and the Department of Justice (DOJ), these new best practices reemphasize several strategic and effective ways for parties to avoid a request for additional information (Second Request) or substantially minimize its burden
The revised best practices were made available on 10 August 2015. They note that Commission staff have seen limited use of the previous guidance issued by the Commission in 2006. This prompted the Bureau to issue a revised set of best practices, recognizing that more streamlined e-discovery and search techniques may have made the mechanistic reforms contained in the 2006 Reforms less relevant. The new best practices shift attention to early advocacy and timing discussions with FTC staff that can either eliminate a Second Request or otherwise substantially limit the scope.
The three key areas are discussed below:
(1) Voluntarily Provide Information Early
The Best Practices emphasize first that counsel and parties should engage with staff early, either during the initial waiting period or even before the filing is made. This proactive interaction to explain key information can help to eliminate the need for a Second Request or at least narrow the burden of production.
The FTC highlighted the key information that staff almost always ask for to evaluate a transaction early on. Gathering this information expeditiously can accelerate the merger review process.
- Strategic and marketing plans for the previous two years and sometimes further back than two years in order to capture a pivotal business development or historic event.
- List of all currently manufactured, marketed, or sold products and products in development.
- List of top 10 customers (and suppliers if relevant) with contact information for customers of overlapping products.
- List of top competitors with contact information for competitors who provide overlapping products.
- Market share information for overlapping products.
- A list of the type of reports the company prepares on a regular basis.
- Information to assist staff in assessing the proposed merger and the markets involved.
- An organization chart (to help identify document custodians or candidates for interviews).
- A data map to identify the types of data available and the relationship between different data sets.
(2) Effective Use of “Withdraw and Refile”
The Best Practices reaffirm the Parties ability to withdraw their HSR filing and refile to reset the 30-day period and give the staff more time to digest any open issues. No additional filing fee is required. This tactic is quite useful in reducing the likelihood of a Second Request or otherwise limiting the scope of a Second Request for transactions that do not appear to require substantial review. In recent years, some agency staff had given conflicting signals on whether a “pull and refile” was favored by Bureau management and could have any positive effects. This statement reaffirms that parties can use the pull and refile mechanism when appropriate as a way to provide staff with more time and information that might eliminate the necessity of issuing a Second Request.
(3) Negotiating the Second Request
Finally, the Best Practices reaffirm the importance of opening a dialogue with staff to negotiate modifications to the Second Request in order to reduce the burden on merging parties. For most transactions that receive a Second Request, open communication and negotiation with staff is vital. These conversations give staff an opportunity to convey their competitive concerns and what information they need, while allowing parties to play an informative role. In addition to the substantive issues, early discussions about custodians, data, and documents lead to a more focused review.
With respect to requests for modifications, the Best Practices note that parties can expect to receive a decision within two business days. The Bureau will still issue formal letters granting modifications, but they no longer require the signature of division management. Timing agreement discussions should begin even earlier, especially for transactions that require substantial review. The staff and parties can lay out an investigation plan that considers each side’s burdens and needs.
During the last 15 years, both the FTC and DOJ have listened to concerns from the private sector about the rising costs of compliance with Second Requests and have taken steps to try to reduce the burden and costs imposed upon merging parties. Some of these steps have produced positive results, while others have been forgotten over time. Effective counsel have learned that the most productive way to reduce the burden and costs of a Second Request is to engage with agency staff on the relevant issues as early as practical. These new best practices reaffirm that approach.
Special thanks to Aleshadye Getachew for her contribution to this Alert.