Antitrust Roundtable with Senior Government Officials

1. Antitrust Roundtable with Senior Government Officials Presented by: J. Thomas Rosch Molly S. Boast Howard Feller Commissioner Deputy Assistant Attorney General Partner Federal Trade Commission U.S. Department of Justice McGuireWoods LLP Washington Metropolitan Area Chapter of the Association of Corporate Counsel March 31, 2010

2. Agency Structure • What is the role of a Deputy Attorney General? What sections or matters do you have responsibility for? • What is the role of a Commissioner?

3. Enforcement Priorities • President Obama promised during the campaign that he would increase antitrust enforcement if elected. Assistant Attorney General Christine Varney and FTC Chairman Jon Leibowitz have stated publicly in various speeches that under their leadership DOJ and the FTC will enforce the U.S. antitrust laws more vigorously than under the Bush administration. Has this, in fact, occurred? Are DOJ and the FTC doing anything differently now? Are there any new or different priorities?

4. Enforcement Priorities • What industries are enforcement priorities for your agency? • Are any particular industry practices targeted for antitrust enforcement? • What are some of your agency’s most significant achievements during the new administration?

5. Civil Antitrust Enforcement • DOJ and the FTC share responsibility for civil antitrust enforcement. For a civil nonmerger matter, how do the agencies find their cases? How do you decide whether an investigation should be opened? How does a company find out that it is being investigated? • As a general matter, describe how companies should respond to CIDs and deal with both staff attorneys and senior government officials during the course of an investigation. What are the kinds of evidence or data that government attorneys find most persuasive?

6. Civil Antitrust Enforcement • Many companies ask about the possibility of having politicians contact or lobby DOJ and the FTC about a pending investigation? Is that effective in some cases? How do staff attorneys and senior government officials react to contacts by politicians about pending investigations? • Describe what you have seen as the best practices and the worst practices by parties in responding to an investigation, whether it relates to business activities or a merger or acquisition. What are the best ways for the parties to present their evidence and arguments?

7. Mergers and Acquisitions • For mergers and acquisitions, who decides which agency will review a particular transaction? Is there anything the parties can do to help the agencies during the clearance process? • Corporate counsel and company officials always ask whether there is any difference between how DOJ and the FTC handle a merger review. Is there? • What are the kinds of evidence or data that the agencies find most persuasive in merger analysis?

8. Mergers and Acquisitions • Recently DOJ and the FTC held a series of joint public workshops to explore the possibility of updating the Horizontal Merger Guidelines that are used by both agencies to evaluate the potential competitive effects of mergers and acquisitions. Can you give us any insight as to what the changes might be? • The fact that a transaction is not reportable under the HSR Act does not mean that the transaction is outside the purview of U.S. antitrust authorities or that it will be immune from challenge. In fact, both agencies have challenged relatively small transactions that were not reportable because they were below the filing thresholds. What kinds of small deals will the agencies investigate and how do you find out about those deals?

9. Mergers and Acquisitions • Both agencies also have made it clear that they may challenge mergers after they are consummated, even if the parties to the merger have filed the requisite HSR premerger notification and the waiting period has expired without the agency taking any action. For example, four years after the merger of Evanston Northwestern Healthcare and Highland Park Hospital, the FTC filed a complaint against Evanston. How do the agencies monitor consummated transactions and under what circumstances will DOJ and the FTC investigate and possibly challenge mergers that have been consummated already?

10. Mergers and Acquisitions • Sometimes it isn't the transaction itself that gives rise to a challenge, but the conduct of the parties prior to the deal closing. "Gun jumping" is the term used to refer to a variety of actions that merging parties might take prior to closing to facilitate the merger and expedite the integration of the companies. On the one hand, it is generally recognized that the buyer does have legitimate commercial interests in protecting the value of its acquisition. Merging companies are usually anxious to "hit the ground running" when the transaction closes so that they can maximize the benefits from the deal.

11. Mergers and Acquisitions On the other hand, DOJ and the FTC take the position that firms must remain competitors until closing, and cannot lessen competition between them in order to facilitate a merger that has not been consummated, and have made clear that premature integration may lead to antitrust enforcement. What kinds of things can the merging parties start to work together on before the transaction closes and what do they have to avoid?

12. Mergers and Acquisitions • Sometimes the parties to a merger or acquisition recognize early on that there are some competitive problems but believe there are viable ways to fix the problems without killing the deal. How and when should the parties approach the agencies with a "fix it first" proposal?

13. Horizontal and Vertical Arrangements • Most companies are well aware that price fixing, bid rigging and market allocations among competitors are illegal. But other types of horizontal arrangements or joint ventures among competitors can be lawful. What are the practical limits on competitors working together? Where should they draw the line? • How active have your agencies been recently in challenging joint conduct or collaborations by competitors? • How important is the existence of an active and effective corporate antitrust compliance program in your investigations of joint conduct by competitors?

14. Horizontal and Vertical Arrangements • To what extent are DOJ and FTC looking at exclusive dealing arrangements? • Should leading companies in oligopoly markets where there are only a few sellers be concerned about antitrust enforcement actions over aggressive pricing, discounting and marketing practices? • Are there any vertical arrangements between suppliers and customers that you think will be enforcement priorities for your agency?

15. Single Firm Conduct/Section 5 of the FTC Act • Section 2 of the Sherman Act, relating to single-firm conduct, can present unique challenges to companies that have high market shares or are leaders in their market. In May 2009, DOJ withdrew the Section 2 Report that was issued during the Bush Administration, stating that businesses should not rely on it as Division antitrust enforcement policy. What is the Division's current position on Section 2 enforcement? What kinds of activities by companies with high market shares will DOJ focus on?

16. Single Firm Conduct/Section 5 of the FTC Act • The FTC didn’t join in the Section 2 Report. What are the FTC’s current enforcement priorities for single firm conduct by companies with high market shares? • The FTC recently has begun using Section 5 of the FTC Act to challenge single-firm conduct. Section 5 is broader than the antitrust laws and prohibits unfair methods of competition and deceptive acts and practices. In December 2009, the FTC sued Intel Corp., the world's leading computer chip maker, charging that the company has illegally used its dominant market position to stifle competition and strengthen its monopoly. The FTC challenges Intel's conduct as an unfair method of competition in violation of Section 5. What kinds of activities by companies with high market shares will potentially be subject to challenges under Section 5?

17. Single Firm Conduct/Section 5 of the FTC Act • The FTC has also used Section 5 to challenge conduct that is not easily reached under the antitrust laws. In January 2008 the FTC issued a complaint and entered into a settlement agreement with Negotiated Data Solutions regarding its enforcement of certain patents against makers of equipment employing Ethernet, a computer networking standard used in nearly every computer sold in the U.S. The FTC relied solely on Section 5, alleging that N-Data's conduct was both an unfair method of competition and an unfair act or practice. Notably, the FTC did not allege a violation of Section 2 of the Sherman Act. What guidance can you offer about the types of conduct the FTC may challenge under Section 5 in the future?

18. Criminal Antitrust Enforcement • Only DOJ has authority to prosecute antitrust violations criminally. How do you decide whether a matter will be pursued criminally rather than civilly? What triggers a criminal investigation? Do you investigate a particular company or an entire industry? • Describe the extent to which DOJ has been prosecuting criminally competitor activities involving price fixing and bid rigging. • What are some of the tools DOJ uses to investigate?

19. Criminal Antitrust Enforcement • The consideration of a company's waiver of attorney-client and work product privileges when assessing cooperation in a criminal investigation has been a hot topic ever since January 2003 when DOJ, in the wake of large-scale corporate scandals, issued the "Thompson Memo," which outlined corporate charging guidelines for federal prosecutors and encouraged target companies to waive their attorney-client and work product privileges with regard to their internal investigation in an effort to avoid criminal prosecution. This caused an uproar in general counsel offices.

20. Criminal Antitrust Enforcement In August 2008, the DOJ issued the "Filip Memo," which revised the framework for requesting and evaluating privilege waivers, and said that prosecutors could no longer pressure companies to waive attorney-client and work product privileges in order to receive credit for cooperating in an investigation. What is DOJ's current position on waiver requests? Are there any limitations on what DOJ is requesting be disclosed? What is the impact on corporate counsel seeking to effectively design and conduct internal investigations?

21. Criminal Antitrust Enforcement • Describe how DOJ finds out about possible price fixing or bid rigging conduct? What are the typical sources of these investigations? • DOJ offers corporate and individual leniency programs for conduct by competitors that might raise criminal issues. How do these programs work and when does it make sense for a company to seek leniency? What are the benefits of seeking leniency? What is the difference between being the first company to seek leniency and the second?

22. International Convergence • Modern business operates in a global marketplace, and there are a growing number of antitrust enforcement agencies operating worldwide. Today more than 100 countries have adopted antitrust laws. That is a lot of competition regimes for companies doing business globally to deal with. In what areas of antitrust enforcement is convergence being sought, and how successful have your efforts been to date?

23. International Convergence • Are there currently differences in the antitrust enforcement objectives or approaches of the various competition regimes? • To what extent do the agencies cooperate or work with fellow antitrust authorities on investigations?

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