For Release: December 11,
2002 FTC Competition
Director Announces Best Practices for Merger Investigations
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." |