In a speech delivered on September 25, 2018 at the 2018 Global Antitrust Enforcement Symposium at Georgetown University, Assistant Attorney General Makan Delrahim announced that the Department of Justice (DOJ) Antitrust Division “will aim to resolve most [merger] investigations within six months of filing” if parties to the merger cooperate closely with the DOJ throughout the review process. In furtherance of this goal, Delrahim announced several reforms to what the DOJ will generally require from parties in a “second request,” as well as reforms to standard practice at other stages of a merger investigation. Delrahim also announced that the DOJ is withdrawing its 2011 Policy Guide to Merger Remedies and will release an updated policy. In the meantime, the 2004 Policy Guide has been reinstated.
“Second Request” Reforms
A small percentage of deals notified to the DOJ will result in an onerous “second request” for information, including documents and data. Many of the significant reforms to the DOJ’s investigatory process will be set forth in a new model timing agreement, which will provide a framework for the DOJ and deal parties to agree on the scope and duration of this aspect of the DOJ’s investigation.
These reforms include the following (subject to modification by a deputy assistant attorney general):
- an assumption “that 20 custodians per party will be sufficient”
- a presumptive limit of 12 depositions
- a commitment to reach a decision within 60 days from when the parties certify compliance
In turn, the DOJ will expect from the deal parties:
- “faster and earlier productions of documents” and data
- elimination of privilege “gamesmanship” wherein parties initially withhold and then “de-privilege” significant numbers of documents that “never should have been withheld in the first place”
- when the DOJ challenges a merger in court, a lengthier period of discovery
Other Investigation Reforms
Delrahim also announced the DOJ’s openness to meeting early on with parties to a deal – especially with key businesspeople – “to understand their deal rationale and any other facts they believe will be important to [the DOJ’s] analysis.” Further, the DOJ expects to post a model “voluntary access letter” on the Antitrust Division’s website with the aim of setting forth the type of information the DOJ will be interested in obtaining from the parties to help the DOJ make an initial assessment during (or perhaps even before) the initial waiting period after the DOJ is initially notified of the transaction. The DOJ has also undertaken “to ensure that [it has] an investigative plan in place to maximize [its] use of the additional time” it gets when the parties to a deal choose to “pull and refile” their HSR notifications prior to the expiration of the initial waiting period, which, in certain cases, may reduce in scope or obviate entirely the need for a formal second request. Finally, the DOJ will be more aggressive in enforcing timely compliance with civil investigative demands issued to non-parties with information relevant to merger investigations.
Withdrawal of Policy Guide to Merger Remedies
Finally, Delrahim announced that the DOJ is withdrawing its 2011 Policy Guide to Merger Remedies and will release an updated policy. In the meantime, the 2004 Policy Guide has been reinstated. Among other things, this action demonstrates an explicit return to a strong policy preference for structural remedies (i.e., remedies requiring business unit divestitures) over conduct remedies, something that Delrahim has repeatedly stated. Indeed, under the 2004 policy, conduct remedies are disfavored and appropriate only when required to ensure an effective structural remedy or when “significant efficiencies” would be lost if a structural remedy were imposed or the deal were blocked altogether. In addition, under the 2004 policy, the DOJ requires that a remedy will only be accepted if there is a “sound basis for believing” that a merger will substantially reduce competition. “The Division should not seek decrees or remedies that are not necessary to prevent anticompetitive effects, because that could unjustifiably restrict companies and raise costs to consumers.”
While the announced process reforms do not affect a deal’s underlying substantive risk – and there may be exceptions where the DOJ will push to deviate from these guidelines – the reforms are welcome developments for companies contemplating deals which may be reviewed by the DOJ. They explicitly acknowledge the DOJ’s understanding that “[d]elay is a form of uncertainty and risk, [which the agency] should seek to remove . . . from the merger-review process whenever possible.” While, as Assistant Attorney General Delrahim stated, the DOJ “will never compromise [its] ability to enforce the law effectively,” the reforms nevertheless demonstrate that the Antitrust Division is keenly attuned to the burdens that merger investigations may place on deal parties and is open to close cooperation with those parties to increase the efficiency of what can be quite onerous undertakings. Indeed, the timelines of recent DOJ investigations – including those involving Cigna-Express Scripts and Disney-Fox – indicate that the DOJ has already endeavored to accelerate its merger reviews in accord with this announcement.
Practice Management Attorney Mark R. Laramie contributed to this client alert.