Merger Review: Dealing with the Enforcement Agencies

Merger Review: Dealing with the Enforcement Agencies

The Antitrust Masters Course V

September 30, 2010

Andrea Agathoklis, Department of Justice

Norman A. Armstrong, Jr., Federal Trade Commission

Phillip A. Proger, Jones Day

The Basics

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Preparing Your Client

Prepare early Give your client the “talk”

Managing clients’ expectations Pay attention to potential 4c documents and 4c creation

Ensure all deal-related documents are reviewed by antitrust counsel (including what goes into data room)

Antitrust risk-shifting provisions Ordinary course of business provisions

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Preparing Yourself

Determine where to file Coordination across jurisdictions is key -- decisions on

timing and substance cannot be taken in one jurisdiction without considering impact in other jurisdictions

Develop the analysis Matrix of overlap products between merging parties and

competitors Develop pro-competitive rational for the deal Consider any vertical issues, potential competition

issues

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Preparing Yourself

Gather information that agency will request the parties to provide voluntarily during initial 30-day period Access letters are increasingly akin to mini-

Second Requests Develop customer contact plan in

coordination with client and co-counsel Importance of customer views Opportunity to shape those views

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Considerations in Developing a Customer Contact Plan Be mindful that that agency is likely to call these

customers – be prepared to have agency hear your arguments Identify whom to call Identify who to place call Timing Talking Points!

Explain positive benefits of deal to customer Address potential concerns

The HSR Form and First 30 Days

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HSR Filing

4(c) documents Essential to include all 4(c) documents with the

filing or risk having the filing bounced later, including during the pendency of the Second Request – this restarts the clock

[? In the future…4(d) documents] Clearance considerations

Managing a deal that could be home to FTC or DOJ in the first 30 days

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Proposed Revisions to HSR Form How useful was the old form? Goal to streamline the form and eliminate

burdensome reporting requirements that did not add meaningfully to a preliminary review of the transaction

BUT…changes may actually increase some burdens

Likely these changes will be implemented but the comment period runs until October 18

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Quick Look at the Proposed Revisions to HSR Form 4(d) Documents

Offering memos prepared within 2 years of date of filing referencing business or assets being acquired Not limited to “this” transaction only

Docs prepared by I-bankers, consultants, or advisors within 2 years of filing that are 4(c) in nature referencing business or assets being acquired Not limited to “this” transaction only

Synergy/efficiency studies Treatment of privileged documents – priv log?

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Quick Look at the Proposed Revisions to HSR Form Drop base year from Item 5 Identification of Item 6 majority and minority-owned

holdings, and major s/h “Associate-Owned” Overlaps in Item 7

New concept to eliminate some wiggle room in the definition of a UPE

Entities under common management Associates need to be identified for purposes of Item 7 overlap Likely to affect investment funds and others who hold or manage

portfolio companies “Knowledge and belief” standard

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Reach Out or “File & Pray”: Factors to Consider Is the transaction reportable? Is it a high profile deal? Will competitors or customers complain? Is it an industry that the agencies know well? Are there problematic 4c documents? Merger environment Delaying the initial HSR filing and approaching the

agencies may provide more time to remove products from the investigation – or not

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Detour: the Non-Reportable Deal How do agencies discover these deals?

Parties Competitor/customer complaints Newspapers/industry publications

~100 hours of investigation before compulsory process memo/meeting

CIDs/subpoenas Mirror a Second Request

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The First 30^ Days

Agencies will request information from parties during initial waiting period List of top 10 - 20 customers by product Strategic plans/business plans Industry or company reports

Agencies will: Review the HSR filing Interview market participants Draw upon past investigations Conduct product market research from publicly available sources Rely on presentations/communications by outside counsel

^ 15 in certain cases

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Pull and Refile

Only can be done once without repaying filing fee

Must be refiled within 48 hours Neutral position by staff Parties should consult with management

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Quick Look

What is it? More limited production

Typically docs, but could include data

Ideal when discrete issues exist that may be resolved with limited discovery

Hope to get to finish line without time and cost of full production

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Quick Look

Typical Structures: Full production from a small number of custodians ENTIRE production for small number of

custodians By issue/specification Usually more difficult

Introduces cherry-picking issues Consequences of using or not

The Second Request

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Negotiating the Scope

Agencies should consider ways to remove Products Custodians Types of documents (i.e., foreign language)

In return, parties should consider Timing Agreement (allocation of resources issue)

Different Types of timing agreements Rolling production

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Investigational Hearings

Preparation Agencies: should closely search all documents

produced as this will form the basis for the inquiry Parties: should closely search all documents

produced as this will form the basis for the agency’s inquiry

No actual “objections”

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Considerations in Negotiating a Remedy FTC v. DOJ policies and preferences Obtaining buy-in from FTC Commissioners

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Potential Strategies to Persuade Staff White Papers Presentations Interviews with key business executives Working with economists and economic data

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Key Tips for Dealing with the Enforcement Agencies

Know and use your own documents Maintain your credibility Join issue early and often