FTC Issues Revised Model Second Request and Merger Review Best Practices | Practical Law

FTC Issues Revised Model Second Request and Merger Review Best Practices | Practical Law

The Federal Trade Commission (FTC) revised portions of its Model Second Request and issued merger review best practices. The new guidance reflects changes to merger review practices in recent years, including the increased use of pulling-and-refiling and the growing importance of data and electronic discovery and search techniques.

FTC Issues Revised Model Second Request and Merger Review Best Practices

Practical Law Legal Update 5-617-8914 (Approx. 4 pages)

FTC Issues Revised Model Second Request and Merger Review Best Practices

by Practical Law Antitrust
Published on 04 Aug 2015 • USA (National/Federal)
The Federal Trade Commission (FTC) revised portions of its Model Second Request and issued merger review best practices. The new guidance reflects changes to merger review practices in recent years, including the increased use of pulling-and-refiling and the growing importance of data and electronic discovery and search techniques.
On August 4, 2015, the Federal Trade Commission (FTC) issued a revised Model Request for Additional Information and Documentary Material and a list of best practices for merger investigations. The FTC also reviewed the results of merger review process reforms the agency enacted in 2006 and found that they did little to reduce the length of merger investigations. The updates are intended to help balance the cost and time burden of a Second Request with the need to thoroughly investigate potentially problematic mergers.
The FTC also updated its BC Production Guide, which provides guidance on submitting information electronically.

Merger Review Best Practices

The FTC issued best practices to provide guidance not included in the 2006 Reforms to the Merger Review Process. The best practices are intended to increase the efficiency of merger reviews. Among other things, the FTC advised parties to merger investigations to:
  • Volunteer key information not included in the Hart-Scott-Rodino (HSR) filing during the initial waiting period or before the filing is made. Volunteering supplemental information early may avoid issuance of a burdensome request for additional documents, known as a Second Request.
  • Be prepared to provide the FTC with specific documents early in the process, including recent strategic plans, lists of customers and competitors, organization charts and a map of how data is stored within the organization.
  • Withdraw and refile their HSR filing near the end of the initial review period if there are lingering issues that may be resolved without a Second Request.
  • Effectively negotiate the scope of a Second Request. Second Request negotiations are most successful when the FTC is able to easily identify pertinent information. The merging parties should bring employees or counsel to negotiations that are qualified to discuss:
    • substantive issues;
    • file custodians; and
    • where and how relevant documents are stored.
  • Expedite the Second Request modification process by emailing FTC staff draft modification language, which must be approved by a formal staff letter but no longer requires division management’s signature.
  • Provide the FTC with search terms that would help identify responsive Second Request documents. The responding party remains responsible for producing all responsive documents. The guidance notes that the FTC will review and comment on search terms but will not agree to a particular list.
  • Work with FTC staff to identify custodians to prioritize for a quick look Second Request investigation. The guidance notes that while the 2006 reforms called for the quick look process to be formalized in a written agreement, this rarely occurs and tends to cause delays.
  • Begin timing agreement discussions as early as possible, particularly if there are many markets for the staff to review or if the parties are requesting that the staff:
    • review white papers;
    • analyze peripheral markets; or
    • engage in settlement discussions.

Revised Model Second Request

The FTC revised the Model Second Request specifications and instructions related to:
  • Data sets.
  • Pricing information.
  • Instructions for search terms and using predictive coding.

Data Sets

The FTC added to the Model Second Request a provision that requires companies to identify all electronic databases used by the parties in connection to the relevant product or service and submit all electronic data corresponding to that product or service in a data set. The submission should include a data dictionary that lists and defines:
  • All field names.
  • Any codes appearing in the data set.
  • The primary key used in the data set to define a unique observation.
The Model Second Request also requires companies to submit a data map identifying where and how data is stored within the organization, including the location of servers and backup systems and the network topology of computer systems.

Pricing

The FTC amended the pricing provision of the Model Second Request to require that parties submit, in addition to what was previously required, for any relevant produce or service in the relevant area:
  • Documents relating to:
    • pricing structures; and
    • price zones.
  • All analyses of pricing or profitability of any relevant product or service sold or provided to the company by a third party or through other trade channels.

Search Terms and Predictive Coding

The FTC added a provision requiring the responding party to identify any electronic production tools used to collect documents for the Second Request, including:
  • Keyword searching.
  • Technology assisted review (computer algorithms not including keyword searches).
  • Email threading and de-duplication.
The responding party should also provide:
  • Keywords search terms.
  • An in-depth explanation of how the technology assisted review was conducted.
  • A contact person to testify on behalf of the responding party regarding electronic production tools.
For more information on Second Requests, see Practice Note, Second Requests in Merger Investigations.