On September 28, 2021, the Federal Trade Commission (“FTC”) announced changes to its merger review process designed to increase the rigor of the review and “streamline” (in the FTC’s words) the interactions between the merging parties and the FTC. The announced changes will expand the potential topics covered during investigations, while also standardizing the negotiation and compliance process and aligning certain practices with the FTC’s sister antitrust agency, the U.S. Department of Justice Antitrust Division (“DOJ”). The practical result is that complying with FTC merger investigations will now likely take merging parties longer, cover a greater array of information and documents and likely increase the cost and time merging parties incur responding to subpoenas and voluntary requests for information.

The FTC and DOJ have concurrent jurisdiction to enforce the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), which requires merging parties to file a notice to the FTC and DOJ of mergers that meet certain size thresholds. The HSR Act is suspensory—parties may not merge until the review is complete. When the government has reason to believe a merger could harm competition, it issues a Request for Additional Information and Documentary Material, otherwise known as a Second Request. The Second Request acts as a subpoena of documents and information regarding the merging parties and competition in the relevant industries.

The FTC’s recent Press Release announced five specific changes to the Second Request process:

  1. Second Requests will be broader in scope. The FTC announced that it will include “additional facets of market competition” in its review, including labor markets, non-competition agreements, unionization and the involvement of private equity firms. Additionally, the FTC will investigate newer theories of harm, including whether cross-market effects (where a party uses market power in one market to negotiate higher rates or prices in other markets that do not horizontally overlap) could lead to consumer injury. These topics are beyond the traditional analysis associated with merger transactions and will increase the response, in cost, time and scope, merging parties provide.
  2. Parties must submit “foundational information” before the FTC staff will negotiate modifications. Foundational information includes the business responsibilities of key personnel and the deal team, as well as how certain information and data is maintained. While this information is always provided to the government during a Second Request, the FTC will now prioritize receiving this information before other negotiations can occur. The change is largely formalistic, but one that likely lengthens the negotiation process.
  3. The FTC will require information regarding e-discovery up front. The FTC historically required parties to describe the tools utilized to respond to the Second Request at the point of compliance, allowing the FTC to challenge compliance for overly restrictive tools and processes that did not comport with industry standards. Now, the FTC will shift the burden of the parties to explain the review process prior to utilizing the technology to assist the review, which more closely aligns with DOJ practice.
  4. Parties must submit complete privilege logs. Since 2006, the FTC has permitted parties to submit partial privilege logs, specifically the full logs for five individuals or ten percent of the agreed custodians. This significantly reduced the cost and time for parties to comply with Second Requests. The FTC will no longer provide this option to parties.
  5. All Commissioners will have access to Second Request materials. Likely in response to statements by Commissioner Wilson that relevant information including Second Requests was not available to Commissioners prior to meetings with parties, the FTC will now institute a system to ensure Commissioners have access to relevant agency requests and materials.

While the FTC suggests these changes will “streamline” the merger review process, in practice, these changes create new investigation topics and procedural gates that merging parties must navigate prior to complying with a Second Request. At a point when the Commission is already suffering “resource strain” under an unprecedented volume of merger filings, these additional hurdles are likely to increase the total time and cost necessary to respond to an FTC inquiry, and will require additional planning during the initial waiting period to ensure that transaction timelines are not further delayed.