What to Expect During Antitrust Merger Reviews and Investigations Under the Biden Administration (Part 1)
, Alan H. Schwartz
Antitrust enforcers are revising the gamebook for firms that hope to get their mergers through the federal merger review process.
As this blog has previously reported on increased antitrust enforcement under the Biden Administration, the Federal Trade Commission (“FTC”) and U.S. Department of Justice (“DOJ”) are continuing with their renewed efforts to promote competition and block potentially anticompetitive mergers. As part of their investigations as to whether the antitrust laws have been violated, or whether a proposed merger could be anticompetitive, these agencies will often issue a “Second Request” or Civil Investigative Demands for information.
With corporate merger activity nearing an all-time high in the U.S., the FTC recently announced changes to its review process for mergers and acquisitions (“M&A”).
The FTC reviews potential mergers pursuant to the Hart-Scott-Rodino Act, which requires companies to provide the FTC and Department of Justice with notice of transactions above $92 million. After the companies seeking to merge submit information about the proposed transaction, the DOJ and FTC have 30 days to conduct an initial investigation and determine whether they need additional information. If the FTC or DOJ asks for additional information about the merger through a “Second Request,” the potential deal is placed on hold until the companies have complied with the request.
Increasing Number of Mergers
M&A deal value in the U.S. is up 264% compared to last year. This increase is due in part to the pandemic, which delayed some deals until this year. Another impetus for mergers is the strong stock market, which has increased the market for buyers and sellers by driving up corporate valuations. There were 2,436 merger filings in the first eight months of 2021.
To deal with the increase in merger filings, with its limited resources, the FTC is implementing reforms to its process for investigating mergers and acquisitions, including its conduct of second requests.
Five Process Changes for FTC Second Requests
- More “rigorous” merger reviews. According to the FTC, it is “seeking to ensure [its] merger reviews are more comprehensive and analytically rigorous.” The FTC reviews various factors to determine whether a proposed transaction would violate the antitrust laws. The FTC’s second requests “may factor in additional facets of market competition that may be impacted. These factors may include, for example, how a proposed merger will affect labor markets, the cross-market effects of a transaction, and how the involvement of investment firms may affect market incentives to compete.”
- Information companies must provide before review. Companies must provide descriptions of the business responsibilities of employees responsible for relevant lines of business and those employees who are responsible for negotiating, analyzing, or recommending the merger. The FTC says “[c]ompanies must also provide basic information about how they maintain data that is responsive to the specifications in the second request.” These changes will enable FTC staff to more easily identify possible challenges to productions of documents and data.
- Disclose use of e-discovery tools. For FTC second requests, companies must provide information about how they intend to use e-discovery tools before they apply the tools to identify responsive materials. According to the FTC, “[c]omplete and accurate information is critical in any investigation and there are substantial benefits to ensuring up front that e-discovery processes will identify required information.” This change will also bring the FTC’s second request model closer to that of the DOJ. The FTC has recently posted an updated Model Second Request that states that companies have to “[i]dentify any electronic production tools or software packages utilized by the Company . . . for: keyword searching, Technology Assisted Review, email threading, [and] de-duplication.” It also requires companies to provide a list of the search terms used to identify responsive documents. If Technology Assisted Review (“TAR”) software is used, the companies must describe the collection methodology. 
- Partial Privilege Logs no longer allowed. The FTC is also altering its privilege log requirements to be more closely aligned with the DOJ’s practice. A submission of a “partial” privilege log is no longer an option. Prior to the change, companies were allowed to provide a partial log describing just the names of each person from whom responsive documents were withheld for privilege and the total number of documents that were withheld, with the FTC having the option of later requesting a complete log. Companies withholding privileged documents now must provide a “full” privilege log that must include for each withheld document: the authors, recipients, custodians, date, title or subject line, basis of the privilege (e.g. attorney-client privilege) and a description of the document’s subject matter. Additional details about the full privilege log requirements can be found in the FTC’s Model Second Request.
- Ensuring that second request information is accessible to all Commissioners and agency offices. Second requests were previously not accessible by other agencies or Commissioners and were provided only at the Chair’s discretion. “Moving forward it is now official FTC policy that Bureau staff will provide the full Commission with access to second requests and voluntary access letters by uploading them into a secure system.”
Civil Investigative Demands
The Civil Investigative Demand (“CID”) is another discovery tool often used by the DOJ and the FTC to compel production of documents, testimony and other information in their antitrust investigations. CIDs are issued before a formal complaint is lodged. If you or your company has received a CID, it does not necessarily mean you are under investigation. The agencies often send CIDs to third parties who aren’t the subject of the investigation, but who may have relevant information.
Recipients of CIDs should also be aware that according to the DOJ, the information provided in response to a CID may be used by the DOJ in other civil, criminal, administrative, or regulatory proceedings. “Individuals may refuse, in accordance with the rights guaranteed to them by the Fifth Amendment . . . to produce documents and/or answer any question that may tend to incriminate them.”
If you or your company is the recipient of a Second Request or a CID, or is anticipating that it may be, you should check out Part 2 of “What to Expect During Antitrust Merger Reviews and Investigations Under the Biden Administration.” In Part 2 we will go through some practical tips you can follow to ensure an efficient and timely response. Stay tuned.
Edited by Gary J. Malone
 See FTC Model Second Request at 12.
 See FTC Model Second Request at 23.