Reforms to Second Request Procedures Announced
- On December 15, the Antitrust Division released its amendments to its 2001 Merger Review initiative. The Division hopes that the changes will shorten the amount of time spent on merger reviews and reduce the amount of documents produced by focusing the Division on the most relevant issues and time periods. In addition, the Division also made changes to its model second request.
- Under the new amendments, the Division will now allow parties to enter into a "Process & Timing Agreement," which will limit the Division's search to 30 employees and provide the parties and the divisions will clearer timelines for the completion of the review. To exceed 30 employees, the Division must obtain permission from the relevant section chief. In addition, the Division may add up to 5 employees to the list of each party as the investigation continues. This limitation, however, does not extend to subsequent or prior employees who encompassed the same position, the secretaries or administrative assistants of the employees, or the centralized databases. As consideration for the limitation on the number of employees whose files will be searched, the Division requires that the parties agree to allow the Division a sufficient amount of time to prepare its case if it opts to litigate the issue.
To be eligible for the Process and Timing option, the parties must have provided the Division with all of the information that the Division requested during the initial waiting period, and, after the issuance of the Second Request, provide the Division with 1) a current organization chart and personnel directory, 2) employees who understand the organization, 3) employees who know about the electronic data systems, and 4) employees knowledgeable about the data maintained by the company. The Division notes that it has observed that outside counsel generally do not have the information necessary to satisfy the needs of the Division with regards to organizational structure and information available. Five days after the parties has provided the Division with the information, the Division will give the parties the names of the employees whose files it will want searched.
The Division also made changes to the model Second Request. Some of the changes include decreasing the normal amount of time for which documents will have to be produced from 3 years to 2 years. Data that the company maintains will need to be produced for the previous 3 years. In addition, parties that comply with the second request within 90 days will not be required to conduct a second sweep, except for documents that relate to the transactions that were produced up to 30 days prior to the compliance with the Second Request. If, however, the parties take longer than 90 days to comply with the second request, they will need to conduct a second sweep for all responsive documents up to 30 calendar days prior to compliance with the Second Request.
Other changes to the model Second Request form include: companies may, with the permission of the Division, identify and preserve backup tapes of the companies past data for the duration of the Division's investigation, rather than searching all back tapes; companies need no longer produce electronic documents in hard copy and electronic form; and the privilege log may now omit documents that were sent only between the company and its counsel.
The changes to the Second Request procedures should produce some savings, although the Division had allowed parties in the past to negotiate limitations on the scope of a second request, an option that remains available. The Division noted that despite making revisions previously, the amount of documents produced continued to increase, due to the increasing volume of electronic documents and data that companies produce and preserve. Still the revisions should reduce the amount of time and effort needed to comply with a second request.
2006-Year End Review Unveiled
- On December 21, 2006, the Division released its statistics relating to the merger activity of fiscal year 2006. In 2006, the Division received 1,860 pre merger notification filings under the Hart Scott Rodino Act, an increase of 8.9% over 2005. Of these filings, only 1% received a second request, a decrease from 1.5% in 2005. The Division also highlighted the divestitures and performance remedies it had obtained in different mergers, including Mittal's acquisition of Arcelor, McClatchy's acquisition of Knigh Ridder, and DFA's acquisition of Southern Belle.
In non-merger enforcement, the Division obtained criminal fines of $473,445,600 from various alleged cartel participants, representing an increase of 40% over the amount obtained in 2005. In addition, the Division highlighted its ongoing case against the National Association of Realtors, and the consent decree obtained against the American Bar Association, which required the ABA to pay $185,000 in fines for violating a 1996 consent decree baring the use of the accreditation process of law schools to limit competition.
Tunney Act Update
- In response to Gary Reback's attacks upon the Division's methods and evidence in the MCI/Verizon and AT&T/SBC investigation, the Division filed a reply. The Division stated that Mr. Reback had misrepresented the factual record, misstated the Division's position, and mischaracterized the applicable law. The Division reiterated its position that it had consistently found that the only competitive problem was with the 2-1 buildings where entry was unlikely, and that the scope had never varied.
In addition, the Division argued that Mr. Reback had mischaracterized the law, in that Mr. Reback had argued that the Court needed to find that entry would definitely occur in the 2-1 buildings where the Division had not required divestitures. The Division pointed out that the Merger Guidelines only require that entry is likely to occur. The Division also defended its decision not to challenge 3-2 or 4-3 buildings, as the merging parties were rarely the lowest cost providers to those buildings, meaning that lower-priced options would continue to exist.
Finally, the Division defended the facts, noting first that its research had consistently shown that the applicable issue for entry was access to the building, not access to individual floors. The Division also defended its interpretation of certain documents, although the details were redacted from the public record.
Interestingly, two of the FCC Commissioners, Copps and Adelstein, in their comments regarding the recently approved AT&T/Bellsouth transaction mentioned the ongoing Tunney Act hearing, noting that the parties had agreed to come back to the FCC for further remedies if the result in the hearing changed the adequacy of any of the remedies. Commissioner Adelstein specifically noted that he had reservations about whether the Division's divestiture analysis adequately reflected the competitive harm.