Merger Review: Dealing with the Enforcement Agencies

1. 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

2. The Basics

3. 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

4. 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

5. 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

6. 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

7. The HSR Form and First 30 Days

8. 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

9. 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

10. 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?

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. The Second Request

19. 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

20. 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”

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

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

23. Key Tips for Dealing with the Enforcement Agencies • Know and use your own documents • Maintain your credibility • Join issue early and often