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FTC Issues Guidance for Merger Investigations
In early August, the Federal Trade Commission ("FTC") released guidance on best practices for merger investigations. This is the first major update for such guidance since 2006 and the publication of "Reforms to the Merger Review Process." The new guidance addresses mechanisms by which merging entities can smoothly effectuate an FTC merger investigation in three key areas: Early Voluntary Submission of Information, Effective Use of Withdraw and Refile, and Negotiating the Second Request.
Early Voluntary Submission of Information
As to be expected with a government agency investigatory process, the FTC urged filing parties to provide information as early as possible, even before the Hart-Scott-Rudino ("HSR") filing is made. The agency suggested that plentiful sharing of information from the outset may answer questions about the transaction in the preliminary phase, reducing the burden of production in a Second Request or even dispensing with the need for one altogether.
The FTC also produced a list of information that an entity should assemble "in anticipation of an HSR filing or of a voluntary access letter" to assist with the review process, such as strategic and marketing plans for the prior two years, a list of current products or products in development, a list of the top ten customers or suppliers, a list of top competitors, market share information for overlapping products, a list of regular reports prepared by the company, and any information the company feels may be necessary in helping the FTC investigate the proposed merger.
Effective Use of Withdraw and Refile
The initial review period is rather short, so the FTC suggested that entities should withdraw an HSR filing and then refile, resetting the timing provisions under HSR. The agency very subtly dangled a carrot for merging entities in this way by suggesting that additional time in the initial review period decreases the likelihood of a Second Request, or at the very least decreases the necessary scope of such a request.
Negotiating the Second Request
Finally, the FTC promised to negotiate a Second Request in good faith, but gave helpful hints on how to grease the wheels of such negotiations, such as by providing information on the organizational and decision-making structure or bringing employees or counsel familiar the company's operations, data, storage, and document retention policies to the meetings.
Of note is that the FTC will not agree that a specific list of search terms will be sufficient to comply with the particulars of a Second Request, but the agency will review the search terms and comment on whether such terms may be sufficiently comprehensive. The requested party still bears the weight of responsibility for producing all of the necessary documents and information to fulfill the Second Request and should use search terms or predictive coding at its own risk, but the FTC will at least acknowledge that search terms and predictive coding can play a role in the Second Request process.
For more information on FTC merger investigations or for assistance in complying with such an investigation, please contact the attorneys of McBrayer.
This article is intended as a summary of state and federal law and does not constitute legal advice.
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