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Parties in mergers involving antitrust issues often incur significant additional costs and suffer disruption of their employees’ ability to perform their duties, though these demands are unnecessary to the resolution of the antitrust issues. The parties are forced to suffer these burdens in order to respond to a “request for additional information” issued by the agency (either the Federal Trade Commission or Department of Justice) investigating the transaction. Such a request, referred to frequently as a “second request,” is generally a very broad document request and interrogatories issued to the merging parties in an effort to help the agency analyze the likely competitive effects of the transaction. The agency issues such requests 30 days (or 15 if the transaction is a cash tender offer) after receiving notification of the transaction pursuant to the Hart-Scott-Rodino Act if the staff feels further investigation is necessary. The costs and burdens of complying with a second request dramatically outweigh the benefits to the government. Under the current system, a typical response to a second request requires review of 100 to 200 employees’ e-mails and electronic and paper documents. Often, different locations around the country or the world have to be searched, including local sales offices. After collection (usually using third-party vendors to help with electronic collection efforts), teams of lawyers must review them. To speed the review process along — because the transaction cannot close until 30 days (or 10 days in the case of a cash tender offer) after the parties comply with the request — many (in one case approximately 500) temporary attorneys are hired to assist in the review. The final production to the government often is several million pages. The government cannot review all materials produced in a 30-day (or 10-day) period after receipt before it must make a decision as to whether to seek an injunction to block merger. There are solutions. Under �7 of the Clayton Act, the issue in analyzing the transaction is whether its effect lessens competition or creates a monopoly. Most often, especially in horizontal mergers, this comes down to predicting whether, as a result of the merger, prices for products affected by the transaction will rise. One or even several smoking-gun e-mails from sales representatives or memoranda from low-level executives about the ability to increase prices as a result of the transaction, while exciting, probably will not provide a correct answer to the �7 inquiry. More likely, the essential documents will be concentrated in a few key persons’ files or in limited databases. Every deal is different, and general rules will never be sufficient to eliminate the risk that important information will not be produced. But the costs now imposed in every second request are so high that it is essential to prune the demands. It is important to remember that the purpose of a second request is to provide the government with an adequate basis to decide whether to bring a case to enjoin the transaction. It was never intended that the second request should be a substitute for the expedited discovery process once a case is filed and the process is under the supervision of the court. Accordingly, the second request process should be modified to limit the search to: � Personnel involved in negotiating and planning the proposed transaction. Those documents often provide direct evidence of the parties’ intentions to increase prices or reduce output post-merger; � Key corporate planning documents, such as strategic or marketing plans for each division or product group within the company. These documents provide an understanding of the company’s business and competitive strategies; � Key management overseeing the product or service groups that compete with the products or services of the other party. Those documents allow the government to understand the details of competition in the specific marketplace, particularly between the merging parties. Often the government has a thorough understanding of the merging parties’ markets, such as in telecommunications and oil mergers, making identification of the overlapping products relatively easy. Other times, it may be more difficult, so the request may be drafted initially to cover all products or services produced by the merging parties. The government then must be willing to quickly eliminate those products or services that the parties demonstrate are not competitive with the other party’s; and � Targeted interrogatories seeking data relevant to the competing products to enable the government’s economist to undertake econometric analyses of the likely effects of the transaction. These solutions will still require work by the merging parties. But instead of reviewing the files of hundreds, fewer than 30 individuals’ files may be reviewed. The burden and expense on the parties will be significantly diminished. At the same time, the government will obtain everything they need to make a “go/no go” prosecutorial decision, and the burden on the already understaffed agencies will be reduced. Lauren Albert is an antitrust litigator with the firm Axinn, Veltrop & Harkrider in New York. Copyright �2005 TDD, LLC. All rights reserved.

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