For Release: March 15,
2002 FTC Initiates "Best
Practices Analysis" for Merger Review Process
Series of Brown Bag
Meetings To Be Held
Joseph J. Simons, Director of the
Federal Trade Commission's Bureau of Competition, today
announced plans to conduct public workshops regarding
modifications and improvements to the Commission's merger
investigations process and its use of specific remedy
provisions. The Commission will use this forum to solicit input
from a broad range of interest groups including corporate
personnel, outside and in-house attorneys, economists, consumer
groups, and others who have participated in the FTC's or
Department of Justice Antitrust Division's merger review
process. These "brown bag" workshops will be held in Chicago,
Los Angeles, New York, San Francisco, and Washington, D.C.
during the next several months.
The workshops are being held in
response to criticism and suggestions received by the FTC over
the past several years regarding the burdensome requirements of
the second request process and the length and criteria of the
process for developing and negotiating remedies. Specific areas
in which the Commission is seeking input include: the efficiency
of the merger review process; the time and expense involved in
the process; the perceived stringency of the remedy
requirements; and the information that parties should provide
during the review process.
"These workshops will be a great
opportunity for the public to help us identify where we can
improve our investigations and remedial efforts," commented FTC
Chairman Timothy J. Muris, "and I invite all interested parties
to participate in this review that Joe Simons has initiated."
To solicit maximum information,
two sets of workshops will be held simultaneously: one focusing
on merger investigations and the other focusing on remedies
issues. The merger investigations workshops will focus on merger
investigation practices, particularly FTC procedures for
obtaining information and data used to assess the likely
competitive effects of mergers and acquisitions. The remedies
workshops will consider whether the agency's remedy provisions
are necessary or sufficient and if the process through which
they are negotiated can be improved.
Merger Investigations
The areas in which the FTC seeks
input for merger investigations include:
- The Initial Waiting
Period
- The use of voluntary
information requests or access letters during the
initial Hart-Scott-Rodino Act waiting period before
issuance of any request for additional information or second
request
- The Content and
Scope of the Second Request
- Shortcomings or flaws in the
model second request issued in 1995
- The second request
instructions on sorting or organizing responsive
information
- The preparation of
privilege logs and the merging parties' use of side
agreements concerning future divestitures
- Negotiating Modifications to the
Second Request
- Suggestions for improving the
second request modification process
- Timing agreements between the
FTC and the merging parties
- The treatment of
foreign-language documents
- The FTC appeal procedure for
resolving of disputes over modifications to
the second
request
- Special Issues Concerning
Electronic Records and Accounting or Financial Data
- The use of e-mail and the associated burden
or costs on the merging parties;
this includes techniques for identifying the relevant e-mail
and for collecting and transmitting it to the FTC for its
analysis
- The use of data or information from backup
tapes or electronic storage systems
and the associated burden or costs on the merging parties;
this includes techniques for identifying the relevant backup
or storage information and for collecting and transmitting it
to the FTC for its analysis
- Communications between the FTC and the
merging parties' information-technology personnel, such as
network administrators
- The use of accounting or financial data for
economic analysis of the merger or
acquisition and the associated burden or costs on the merging
parties; this includes techniques for identifying the relevant
data and for collecting and transmitting it to the FTC for its
analysis
- Communications between the FTC and the
merging parties' personnel
knowledgeable about financial or accounting systems, such as
controllers
- Other Information or Data
Gathering Methods
- Information gathering from
third parties, such as customers
- Access to transcripts of
investigational hearings or depositions conducted during the
merger investigation.
Remedies
To facilitate the discussion for the remedies
workshops, the Bureau of Competition has published on its Web
site,
www.ftc.gov, a series of "Frequently Asked Questions About
Merger Consent Order Provisions" (http://www.ftc.gov/bc/mergerfaq.htm).
These "FAQs" represent a review of the Commission's actions in
the past and have been compiled from many years of negotiations
between the FTC's staff and parties to horizontal mergers. The
answers are drawn from prior cases, as well as positions set out
by the Commission and its staff in speeches, articles, and
elsewhere.
The remedies workshops will seek views from
the public on such topics as:
- The Package of Assets to Be
Divested
- How can the Commission assess whether a
divestiture will be viable and thus
remedy the competitive harm created by an acquisition?
- What concerns arise when a divestiture does
not constitute an ongoing business
that has operated on a stand-alone basis?
- Whether assets
beyond those specifically used in the relevant market need
to be divested in order to assure creation of a
competitor that has all needed resources to compete
effectively
- The "Manner" of a Proposed
Divestiture
- What provisions should be included in an
acceptable purchase agreement?
- What kinds of provisions, including
financing terms, raise issues of
ongoing entanglements between the divesting party and the
buyer
- When might continuing obligations, such as
supply agreements and technical
assistance agreements, be required?
- What kinds of provisions may give rise to
concern that less than all required
assets are being divested or that the divestiture may be less
than "absolute"?
- The Proposed Buyer of Divested
Assets
- What criteria should the Commission
consider when reviewing a proposed
buyer for assets to be divested?
- Are certain types of buyers preferable?
- The "Buyer Up Front"
- When should the Commission require that the
divesting party negotiate a firm
divestiture contract with an identified buyer before the
Commission will accept a settlement?
- The Use of "Fix-it-First"
- What benefits can be obtained by use of a
"fix-it-first" approach, where the parties restructure an
otherwise problematic transaction without entering into a
Commission Order? What problems can arise in such a situation,
and what recourse would the Commission have if the parties
have not entered into a Commission Order? Are there specific
industries in which the Commission ought to (or ought not to)
consider the use of a "fix-it-first" approach?
- The Department of Justice
often enters into "fix-it-first" transactions. Have any
problems arisen in those situations and what recourse have
affected parties had? What were the benefits obtained through
use of this process, for the market, and for the companies?
- The Use of
Crown Jewel Provisions
- How do crown jewel provisions affect the
ability of the parties to obtain or
maintain financing for the proposed transaction?
- Do crown jewel provisions have the effect
of creating uncertainty that affects
ongoing or potential customer or supplier relationships?
- Third-party Rights
- How should the Commission and parties deal
with third-party rights under
existing contracts?
- The Risks to Competition and to
the Parties
- What cases highlight the risks to consumers
of competitive harm arising
immediately from the acquisition?
- How should the Commission minimize the risk
that assets to be divested will be
diminished during the period prior to divestiture?
- How should the Commission minimize delay in
accomplishing a divestiture?
- How can the parties minimize delay in
accomplishing a divestiture?
- Follow Up and Determining the
Success of Our Remedy Efforts
- Should the FTC require buyers of divested
assets to report on their operations
of the divested assets to permit the FTC to better determine
whether the FTC's remedy provisions have achieved the
objective of maintaining or restoring competition in the
relevant market? What should those reporting obligations
entail? For how long should they be in force?
- How should the FTC measure the success of
its remedy provisions?
Any one wishing to submit written comments
regarding either of the workshop topics may do so at
remedies@ftc.gov and
bestpractices@ftc.gov .
The schedules and agendas for individual
workshops will be announced as they become available on the FTC
web site,
www.ftc.gov.
|