PROTOCOL FOR COORDINATION IN MERGER INVESTIGATIONS
BETWEEN THE FEDERAL ENFORCEMENT AGENCIES AND STATE
ATTORNEYS GENERAL
Some mergers and acquisitions may become subject
to simultaneous federal and state investigations by either
the Antitrust Division of the U.S. Department
of Justice ("Antitrust Division") or the Federal Trade Commission
("FTC"), and one or more State Attorneys General. To the extent
lawful, practicable and desirable in the circumstances of a
particular case, the Antitrust Division or the FTC and the
State Attorneys General
will cooperate in analyzing the merger. This protocol is intended
to set forth a general framework for the conduct of joint investigations
with
the goals of maximizing cooperation between the federal and
state enforcement agencies and minimizing the burden on the
parties.
I. CONFIDENTIALITY
These joint investigations are generally nonpublic
in nature and will routinely involve materials and information
that are subject to statutes,
rules, and policies governing when and how they may be disclosed.
Participating agencies are required to protect confidential
information and materials
(confidential information) from improper disclosure. Confidentiality
obligations continue even if a receiving agency subsequently
decides to pursue an enforcement avenue different from that
chosen by one or more
of the other agencies.
Agencies receiving confidential information from
another agency (the
originating agency) will agree to take all appropriate steps to maintain
its confidentiality, including:
- timely notification to the originating agency of discovery
requests or public access requests for that information;
- a vigorous assertion of all privileges or exemptions from
disclosure claimed by the originating agency;
- intervention in legal proceedings, or provision of assistance
to the originating agency in intervening in legal proceedings,
if necessary, to assert such privileges or exemptions; and
- complying with any conditions imposed by an agency that
shares information it deems to be confidential.
Any agency that becomes aware that confidential information has been disclosed
in contravention of this Protocol will promptly advise all other agencies
conducting the joint investigation of the disclosure so that its significance
and implications for further information-sharing can be assessed.
II. PROCEDURES INVOLVING THE MERGING PARTIES
The merging parties may be required to produce
documents or other information to the Antitrust Division
or FTC pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act"), Civil Investigative Demands,
or other compulsory process, and to State Attorneys General
pursuant to subpoena or other compulsory process. To minimize
the burden on the merging
parties and to expedite review of the transaction, the merging
parties may wish to facilitate coordination between the enforcement
agencies.
The Antitrust Division and the FTC will, with the consent of the merging
parties, provide certain otherwise confidential information to State Attorneys
General. The acquiring and acquired persons in the transaction must:
A. agree to provide the states, according to the National Association
of Attorneys General Voluntary Premerger Disclosure Compact, or otherwise,
all information submitted to the Antitrust Division or the FTC pursuant
to the HSR Act, Civil Investigative Demands, or other compulsory process,
or voluntarily; and
B. submit a letter to the Antitrust Division or the FTC that waives the
confidentiality provisions under applicable statutes and regulations to
allow communications between the Antitrust Division or FTC and State Attorneys
General.(1)
Where these requirements have been satisfied, the Antitrust Division or
FTC will provide to the state investigating the merger or, if there is
a multistate working group, to the coordinating state:(2)
- copies of requests for additional
information issued pursuant to the HSR Act ("second requests");
- copies of civil investigative demands issued pursuant to
the Antitrust Civil Process Act and
- copies of subpoenas and civil investigative demands issued
by the FTC; and
- the expiration dates of applicable waiting periods under
the HSR Act.
III. CONDUCT OF JOINT INVESTIGATION
The following is intended to set forth suggested guidelines that may be
followed to coordinate merger investigations by State Attorneys General
and the FTC or Antitrust Division. All applicable investigatory, work product,
or other privileges shall apply to any material exchanged.
A. STRATEGIC PLANNING
Coordination between federal and state enforcement agencies may be most
effective at the earliest possible stage of a joint investigation. It should
begin with an initial conference call among the FTC or Antitrust Division
and State Attorneys General.
To the extent lawful, practicable, and desirable in the circumstances
of a particular case, subjects of the conference calls should include:
- Identification of lawyers and other legal and economic
team members working on the case, and assignment of areas
of responsibility.
- Identification of potential legal and economic theories
of the case to be developed and assignment of research projects.
It may be appropriate for state and federal enforcers to
share memoranda, papers and/or briefs prepared in similar
prior matters with appropriate redactions for confidential
information, as well as those prepared during the current
investigation to the extent permitted by the participating
agencies.
- Identification of categories of data, documents, and witness
testimony needed to be obtained, and strategies for obtaining
and sharing such information, including to the extent lawful,
practicable, and desirable, the initiation of requests seeking
the consent of past and future submitters to disclosure of
such information. State Attorneys General should particularly
be encouraged to take responsibility for obtaining data located
within their respective geographic areas or maintained by
state or local governmental agencies.
- Identification of potential consulting economists or other
experts.
- Where multiple states are involved, understandings should
be reached on how information can be most conveniently exchanged.
For example, the coordinating state might assume responsibility
for transmitting documents received from the FTC or Antitrust
Division to other State Attorneys General.
B. DOCUMENT PRODUCTION
Coordinating both the request for, and review of,
documentary materials can reduce the parties' burden and facilitate the
agencies' investigation.
To the extent lawful, practicable, and desirable, three steps
should be taken in connection with issuing a second request or subpoenas,
CIDs,
or voluntary requests for information from the merging parties
or third parties:
- Consideration of ideas from other investigating agencies
on the content and scope of the request.
- Providing correspondence to other investigating agencies
memorializing agreements with parties to narrow or eliminate
request specifications.
- Division of responsibility among investigating agencies
for document review and exchange of summaries and indices.
C. WITNESS EVIDENCE/EXPERTS
To the extent lawful, practicable, and desirable in a particular case,
the State Attorneys General and the FTC or Antitrust Division should coordinate
the joint development of testimonial evidence. The investigating agencies
should try to integrate their efforts to the maximum extent possible. Specifically:
- Identification and development of lists of potential interviewees/deponents
should be undertaken in a coordinated manner. States should
be encouraged to use their greater familiarity with local
conditions/business to identify interviewees and schedule
interviews.
- Joint interviews and/or depositions of witnesses should
be coordinated whenever lawful, practicable and desirable.
An early understanding should be reached regarding the extent
to which notes of interviews will be maintained and exchanged.
Coordination of deposition summaries should also be discussed.
- State Attorneys General and the FTC or the Antitrust Division
should coordinate responsibility for the securing of declarations
or affidavits.
- State Attorneys General and the FTC or the Antitrust Division
should discuss early during a joint investigation whether
to employ experts jointly or separately. If the latter, a
method should be provided for exchange of economic views/theories
among the experts and with staff economists. The preparation
of expert affidavits/testimony should be closely coordinated.
IV. SETTLEMENT DISCUSSIONS
To achieve the full benefits of cooperation it is imperative that federal
and state antitrust enforcement agencies collaborate closely with respect
to the settlement process. While each federal and state governmental entity
is fully sovereign and independent, an optimal settlement is most likely
to be achieved if negotiations with the merging parties are conducted,
to the maximum extent possible, in a unified, coordinated manner.
It will normally be desirable for federal and state enforcement agencies
to consult on settlement terms in advance of any meeting with the merging
parties where settlement is likely to be discussed. Where possible, any
such meeting should be attended by both federal and state representatives.
Furthermore, each enforcement agency should keep the other enforcement
agencies advised of communications regarding settlement with a merging
party.
If any federal or state antitrust enforcement agency determines that circumstances
require it to pursue a negotiation or settlement strategy different from
that of the other investigating agencies, or decides to close its investigation,
it should disclose that fact immediately.
V. STATEMENTS TO THE PRESS
It is important that understandings be reached between the enforcement
agencies regarding the release of information to the news media. These
agreements should cover the timing of and procedures for notifying the
other enforcement agencies prior to the release of any information to the
press.
EXHIBIT 1A
To: Assisant Director for Premerger Notification
Bureau of Competition
Federal Trade Commission
Washington, D.C. 20580
With respect to [the proposed acquistion of X Corp.
by Y Corp.] the undersigned attorney or corporate officer,
acting on behalf of [indicate entity], hereby
waives confidentiality protections under the Hart-Scott-Rodino
Act, 15 U.S.C. 18a(h), the Federal Trade Commission Act,
15 U.S.C. §§ 41 et seq.,
and the Federal Trade Commission's Rules of Practice, 16 C.F.R. §§ 4.9
et seq., insofar as these protections in any way limit confidential
communications between the Federal Trade Commission and the
Attorney(s) General of [insert
pertinent State(s)].
Signed:
Position:
Telephone:
EXHIBIT 1B
To: Director of Operations
Antitrust Division
Department of Justice
Tenth Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20530
With respect to [the proposed acquisition of X
Corp. by Y Corp.] the undersigned attorney or corporate officer,
acting on behalf of [indicate entity], hereby
waives confidentiality protections under the Hart-Scott-Rodino
Act, 15 U.S.C. 18a(h), the Antitrust Civil Process Act, 15
U.S.C. §§ 1311
et seq., and any other applicable confidentiality provisions,
for the purpose of
allowing the United States Department of Justice and the Attorney(s)
General of [insert pertinent State(s)] to share documents,
information and analyses.
Signed:
Position:
Telephone:
EXHIBIT 2
CORRESPONDENCE/MEMORANDUM DEPARTMENT OF JUSTICE
Date: September 6, 1996
To: Antitrust Contacts
From: Kevin J. O'Connor
Assistant Attorney General
Subject: Memorandum of Clarification of Liaison and Coordinating States
Under the NAAG Voluntary Pre- Merger Disclosure Compact
As our experience with the NAAG Voluntary Pre-Merger
Disclosure Compact ("Compact") grows, additional questions concerning its application
inevitably arise. The purpose of this memo is to clarify the distinction
between the "liaison state" under the Compact and any multistate
working groups or litigating groups which may be formed to
deal with a matter that is the subject of a filing under the
Compact.
LIAISON STATE
The function of the liaison state under the Compact is to receive the
filing and to notify forthwith all signatories to the Compact of the filing
and the identity of the merging parties. Upon request, the liaison state
must permit signatories of the Compact to inspect the documents or obtain
a photocopy of the filing from the liaison state. In short, the liaison
state serves a ministerial function of receiving and distributing, upon
request, copies of the confidential filings of the prospectively merging
parties.(3)
COORDINATING STATE
In certain cases, two or more states may investigate or litigate regarding
a particular transaction. This may occur whether or not the Compact has
been invoked. As is the case with any Multistate Antitrust Task Force Working
Group, the process of joint investigation and litigation operates largely
by consensus. Although each enforcement agency retains its sovereignty,
the synergies achievable from a joint investigation can only be realized
if the states share a common interest in goals and process and organize
effectively. Typically, the states most directly, and adversely, impacted
by a proposed transaction, will take the lead in such investigations provided
they have the resources to do so.
Chair Selection: Where a group of investigating
states decides to work together, it will often be desirable
to have a coordinating or "chair" state.
The coordinating or "chair" state should be determined by the
states actively involved in the investigation and litigation after consultation
with the Chair of the Multistate Antitrust Task Force. The criteria for
choosing a "coordinating state" should include, for example,
whether the prospective chair state is (a) likely to be adversely
affected by a proposed transaction, (b) is in a position to
commit resources to
the investigation, and (c) can coordinate effectively with
the other states and the federal agencies that may be involved
in reviewing the same transaction.
Under these criteria, the state assuming the role of coordinating
state is not necessarily the same state identified by the Compact
as the state
undertaking the largely ministerial duties set forth in the
Compact.
Chair Function: The function of the coordinating state shall be
to coordinate the investigative and enforcement activities of the working
group states, to coordinate with any federal agency collaborating with
the states, and to facilitate settlement discussions. Again, because this
is largely a consensual process, the coordinating state should do all of
the above in consultation with the other investigating states and federal
agencies.
Settlement Negotiations: Because merger investigations often occur
in a very short time frame, and because the issue of settlement is often
raised during that time frame, it is imperative that the coordinating states
and the investigating federal agency consult and collaborate early and
often regarding terms and process of settlement. The interested enforcement
agencies are more likely to achieve an optimal resolution by presenting
the merging parties, to the maximum extent feasible, with a united front.
If an individual enforcement agency, state or federal, determines that
its interests require pursuing a negotiation or settlement strategy separate
from the cooperating states and federal agencies, it is incumbent upon
that agency to disclose its posture at the earliest possible opportunity
and to implement its strategy in a way which minimizes any adverse impact
upon the other states and enforcement agencies.
(1) Examples of such a letter are annexed
hereto as Exhibit 1.
(2) Pursuant
to the NAAG Voluntary Pre-Merger Disclosure Compact, the
merging parties may reduce
their burden of complying with multiple state subpoenas by
providing a set of all required materials to the designated "liaison
state." The role of the liaison state is ministerial
in nature. It differs from that of the "coordinating
state," which is responsible for coordinating the investigation
and any resulting litigation. The differences between the
roles of the liaison and coordinating states are described
more fully in the memorandum annexed hereto as
Exhibit 2. Depending on the investigation, these roles
may be performed by the same state or different states.
(3)***The Compact lists the order of
preference for identifying the liaison state upon whom the
merging parties may serve a copy of their filings. This order
of preference includes: First, the principal place of business
of the acquiring party to the merger; second, the attorney
general of the state which is the principal place of business
of the acquired party; third, the attorney general of the
state of incorporation of the acquiring party; and, fourth,
the attorney general of the state of incorporation of the
acquired party. If no member of the Compact falls within
the foregoing four preferences, the parties may make a filing
upon the chair of the Multistate Antitrust Task Force or
any other member of the Compact who is willing to act as
liaison state for such transaction.
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