Sizeable Transactions
Key Elements of the Best Practices

On October 30 2002 the Federal Trade Commission (FTC), the Department of Justice's Antitrust Division, and the European Union announced best practices to enhance cooperation between the agencies in merger investigations. The best practices cover some procedures that have been in place informally between the agencies for several years, but now provide explicit guidance to merging parties on how the agencies intend to coordinate the review of a transaction that may potentially raise antitrust and competition issues on both sides of the Atlantic. Although increased cooperation could result in substantially lower costs, faster merger reviews and greater consistency, this cooperation raises potential strategic issues that companies should consider when executing a transaction with both US and EU dimensions.

Sizeable Transactions

In many sizable transactions, merger reporting requirements mandate filings in multiple countries. These multiple filing requirements often raise the risk of multiple concurrent investigations, thus increasing the costs to the merging parties, and also increasing the risk of conflicting decisions and inconsistent remedies imposed by the reviewing agencies. Cooperation among the reviewing agencies may reduce this risk and reduce the overall costs of merger review. However, the increased cooperation announced by the agencies will not eliminate this risk entirely, and the level of cooperation will still depend, in large part, on the extent to which merging parties waive existing confidentiality protections in each jurisdiction. Thus, companies should still evaluate, on an individual basis, the costs and benefits of potential coordinated review of their proposed transaction when deciding whether to waive existing confidentiality protections.

Key Elements of the Best Practices

The best practices are intended to promote

"fully informed decision-making on the part of both sides' authorities, to minimize the risk of divergent outcomes on both sides of the Atlantic, to facilitate coherence and compatibility in remedies, to enhance the efficiency of their respective investigations, to reduce burdens on merging parties and third parties, and to increase the overall transparency of the merger review processes."

The best practices set out procedures in four distinct areas as follows.

Coordination on timing
While recognizing that different jurisdictions have different timing requirements, the agencies will nonetheless work to keep each other appraised of the timing of their investigations and, to the extent possible, work with the parties to synchronize the timing of their respective investigations. This would eliminate situations where multiple investigations are on substantially different timelines, significantly increasing costs to the merging parties and resulting in decisions being announced at different times, further raising the possibility of conflicting decisions. However, due to different reporting requirements among jurisdictions, this coordination may require the agencies and the parties to discuss timing considerations before filings are made in either jurisdiction. Thus, merging companies need to consider the costs of possibly delaying the filing of merger notices in order to achieve the benefits of coordinated timing.

Collection and analysis of evidence
The agencies will share information collected during their investigations and their respective analyses, including economic analyses, of the proposed transaction, to the extent permissible. The agencies will also coordinate information and discovery requests to the merging parties and third parties, including joint interviews of representatives of the merging parties and third parties, to the extent feasible.

Much of the information collected from parties during the agency's investigation involves non-public and confidential business secrets. Such confidential information is protected from disclosure by the receiving agency under existing statutory confidentiality protections. However, the producing party may waive these protections to allow the agencies to share such confidential information. Such sharing may encourage the agencies to issue uniform information requests, potentially reducing the cost of responding to substantially different requests. However, such waivers may result in one agency receiving information or data from the other that it would not otherwise be entitled to receive under its own statutory authority. Further, one agency may still seek information relating to issues that are unique to its jurisdiction, so parties may still be required to respond to multiple requests.

Consequently, waivers are not without potential costs and may not substantially reduce the costs of producing responsive material. Companies should be cognizant of these potential costs when deciding whether a waiver is prudent in a particular matter.

Increased communication between the reviewing agencies
The best practices set forth a suggested timetable for regular consultations between investigating staffs, including consultations at certain key points during the investigation, such as:

  • before a decision is made to close an investigation;

  • before the reviewing agency decides to proceed with a more extensive investigation (in the United States this would be before the issuance of a second request);

  • before final recommendations are made; and

  • before any remedy negotiations take place with the merging parties.

The best practices also contemplate consultations between senior officials at the reviewing agencies on a regular basis and at similar key decision points during the investigation.

Consequently, parties to transactions that raise significant antitrust and competition issues should expect that agency staff and management will discuss and share their respective analyses of the proposed transaction. However, the nature and scope of those discussions will still depend, in large part, on whether parties have waived confidentiality protections to allow the sharing of confidential business secrets. Without such waivers, these discussions could be severely limited and are more likely to result in inconsistent decisions by the reviewing agencies. Nevertheless, there is no guarantee, even with the receipt of such waivers, that this sharing of information and analyses will produce consistent decisions, because each agency may still have to address issues or facts unique to its own jurisdiction.

Increased discussion and coordination on possible remedies
In order to reduce the risk that the agencies will seek different, incompatible or conflicting remedies, the agencies will encourage merging parties to coordinate the timing and substance of remedy proposals. The reviewing agencies will, to the extent permissible, consult with one another on remedies being considered and may share drafts of the terms of remedy proposals being considered. Therefore, parties will be encouraged to formulate and present comprehensive remedy proposals, addressing any concerns raised by the agencies.

Although this may facilitate consistent remedies, it also could increase the complexity of such proposals and the time necessary to work out a resolution with the reviewing agencies. Thus, although consistent remedies are more likely if this practice is followed, the costs and the time needed to resolve competitive concerns in both jurisdictions may not necessarily be reduced.


Increased coordination between reviewing agencies will potentially reduce the costs and time delays associated with agency review of proposed transactions, and could produce more consistent outcomes and remedies. However, this increased coordination could also produce unintended consequences for merging companies. Merging parties must carefully consider their interests in facilitating this coordination between reviewing agencies and not leap forward reflexively in the interest of perceived expediency. It is critical that US and EU counsel work together closely to formulate strategies dealing with multiple reviews that are in the best interests of the client on a case-by-case basis.

Further, these best practices are limited to the US antitrust agencies and the European Union. They do not cover investigations by separate EU member states (when there is no EU dimension), or by any of the many other antitrust and competition regulatory agencies around the world. Companies involved in international mergers may still face multiple reviews under different timelines by a number of different regulatory agencies. It is important that US counsel work closely with the client, foreign counsel and each reviewing agency, to facilitate completing these reviews as expeditiously and cost-effectively as possible.

For further information on this topic please contact Joseph Krauss at Hogan & Hartson LLP by telephone (+1 202 637 5600) or by fax (+1 202 637 5910) or by email ([email protected]).