Presenting keynote remarks at an annual conference on "Current Topics in Merger and Antitrust Enforcement" in Washington, DC, today Federal Trade Commission Competition Director Joe Simons announced the Bureau's new "Guidelines for Merger Investigations," which are designed to incorporate recently developed best practices into the merger review process.
The Guidelines, which are summarized in a statement available on the FTC's Web site, represent the first outcome of the Best Practices Review begun in March 2002. The Bureau expects the Guidelines to improve the quality and efficiency of the merger review process by expediting the process of gathering useful and focused information and reducing the burden on the parties that have received second requests during the merger review process. The primary components of the Guidelines are described below.
Witnesses Will Be Able to Obtain Investigational Hearing Transcripts. Consistent with the FTC's Rules of Practice, the Bureau's policy in merger investigations will be to release investigational hearing transcripts to testifying witnesses upon their request as soon as the transcripts are available.
Documents Will No Longer Have to be Sorted or Identified by Specification. As now allowed by the Department of Justice, in merger investigations the Bureau will allow parties to provide documents in the order and sequence in which they are actually kept in the course of business, rather than organized by the specifications of the request. Polices Relating to Privilege and Waiver. The Bureau will apply a uniform policy under which the inadvertent production of privileged material will not be considered a waiver of the attorney-client privilege or work product protection. In addition, Instruction P of the Model Second Request will be modified to streamline the information required in privilege logs.
The "Second Sweep" Instruction. Compliance with Instruction N of the Model Second Request may require the parties to re-search all of the people and files subject to a second request within 30 days (and sometimes within 14 days) of certifying substantial compliance. While this instruction cannot be eliminated from the Model Second Request, the Bureau's policy will be to avoid second sweeps whenever possible, and, in cases where some second sweep is necessary, to limit the number of people and the scope of documents searched.
Providing Additional Information on Appeals, Second Requests, and Modifications. The merger review process includes an administrative appeal process by which, if second request negotiations with FTC staff have failed, a party can seek review by the FTC's General Counsel (GC) using an expedited procedure. Subject to confidentiality restrictions (which may require the consent of the parties or appropriate redactions), the GC will endeavor to post copies of its opinions in such appeals on the Commission's Web site to help provide guidance for future investigations. Certain second requests and modification letters will also be posted to provide additional guidance. Due to confidentiality concerns, cooperation from counsel and their clients will greatly assist the Bureau's efforts to improve transparency in these areas.
Electronic Production and Electronic Documents. The Bureau intends the Guidelines to encourage parties to work with the FTC staff to submit electronic documents, e-mails, and other materials in electronic format rather than in hard copy in response to a second request. To assist in this process, specific options for electronic production formats will be identified in the Model Second Request (subject to further modification as new types of electronic document transmission capabilities are developed and the staff's experience with various production formats grows). Additionally, the new Guidelines clarify that the use of electronic "term searches" to identify responsive documents is not considered intrinsically better or worse than other methods of searching for such documents. While the selection of particular methodologies for responding to second requests is ultimately the parties' choice and responsibility, the Guidelines provide suggestions for working with the FTC staff to develop effective term searches which will minimize or eliminate possible concerns over accuracy and comprehensiveness. Finally, in appropriate cases, the Guidelines encourage the staff to work with parties to reduce the scope of search and production of archived or backup electronic materials and e-mails.
FTC Will No Longer Require Sample Products in the Model. Specification 5(a) of the Model Second Request requires the parties to produce a sample of the product relevant to the merger investigation. While parties are encouraged to supply samples if they believe doing so will facilitate the investigation, the submission of sample products will no longer be required.
According to the Bureau's statement, the Bureau has designed the changes announced today to streamline the merger review process, improving the efficiency and speed of FTC investigations while reducing the burden on the parties. Still, good-faith cooperation from counsel and parties remains crucial to the process. As just a few examples, parties should: 1) provide detailed organizational information early in the process to enable the staff to limit the number of individuals whose files must be searched; 2) negotiate with the staff to obtain modifications to the second request; and 3) engage the staff in a dialogue on substantive issues at the earliest possible date in order to focus the investigation.
"Many of the proposals described [in the Guidelines] focus on increasing the flexibility of the Model Second Request," the statement concludes. "We intend to be more flexible, not just in the specific areas discussed, but in a more general sense, by continuing to encourage the staff to recommend issuance of second requests tailored as closely as possible to the industry in question, the transaction at the time, and the specific competitive concerns motivating the requests."
The Bureau does not intend today's announcement to be the final outcome of the merger review process. In fact, some of the items announced are interim changes or menus of options that are being circulated for further public input. However, "the ideas presented apply lessons we have learned from past experience and through dialog with the private sector to produce an even more efficient and effective merger review process."
Office of Public Affairs
Director, Bureau of Competition