On August 4, 2015, the Federal Trade Commission issued updated best practices guidance for merger reviews. This is the first guidance that the FTC has issued on the merger review process since the 2006 merger review reforms. The FTC highlights three techniques that filing parties can use to reduce the time and burden associated with merger review.
Submitting Information Early
The FTC actively encourages parties to submit information, in addition to the materials required by the HSR filing, during the initial waiting period or even before the HSR filing is made. The FTC regards this as a “common best practice” because it enables the staff to develop familiarity with the merging companies and the competitive market place, and to learn industry nuances that may obviate or otherwise streamline a second request. The FTC’s guidance highlights certain categories of information – strategic plans, product catalogs, top 10 customer lists, competitor information, market shares, helpful ordinary course of business documents and anything else pertinent to the potential competitive issues – as being extremely valuable in helping the staff fine-tune and address their potential competitive concerns. The FTC notes that all of these types of materials are ordinarily requested by the staff, so providing these materials in advance of a request may effectively preempt a prolonged investigation or otherwise save time by narrowing the areas of concern.
Effectively Determining When to “Pull and Refile”
One common method of providing the staff with additional time to review a transaction – without the staff having to issue a Second Request – is to “pull and refile” the HSR notification. Refiling does not require payment of a second HSR filing fee if it is submitted within two business days of withdrawing the first HSR filing and the proposed transaction has not materially changed. See 16 C.F.R. § 803.12(c). Withdrawal and refiling of the HSR notification effectively restarts the initial waiting period, providing the staff with an additional 30 days (or 15 days for an all cash tender offer) to determine whether the transaction may clear without issuance of a Second Request. The FTC has previously indicated that deciding whether to “pull and refile” is a case-specific determination that is often best effectuated by seeking “feedback from staff about the open issues and how they may be resolved before deciding whether that option makes sense.” Since complying with a Second Request is burdensome, it may make sense to provide additional review time upfront in transactions where staff appears interested, but issuance of a Second Request is not inevitable.
Narrowing an Issued Second Request
The FTC Rules of Practice require staff to negotiate a Second Request in good faith by meaningfully engaging the parties “to prevent confusion or misunderstandings regarding the nature and scope of the information and material being sought, in light of the inherent value of genuinely cooperative discovery.” See 16 C.F.R. § 2.4. The guidance notes that this requirement is best satisfied through discussions between the parties and staff of competitive issues so that the parties will gain a clearer understanding of staff’s concerns regarding the transaction. This will assist in narrowing the Second Request to efficiently address those concerns. Providing information, such as organizational and data storage charts, to the staff before discussions may also facilitate clarification of such issues quickly. Per the FTC’s August 4 best practice guidance, “[the FTC’s] review of previous investigations suggests that an early, substantive discussion on issues, custodians, data, and documents leads to less costly, more focused Second Requests, which in turn leads to faster compliance and review.”
Engaging the staff in discussions regarding their competitive concerns in a merger may also enable a better understanding of what information can be provided to allow the staff to quickly address their anticompetitive questions. Commonly referred to as a “quick look” to exonerate, certain anticompetitive concerns can be addressed by providing targeted information dispelling the anticompetitive theory. This may be done after the issuance of a Second Request to either significantly reduce the Request’s scope or otherwise allow the FTC to clear the transaction without full compliance with the Second Request.