# FEDERAL TRADE COMMISSION > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A36b25c6dd4b1e3f6 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text 1 1 FEDERAL TRADE COMMISSION 2 I N D E X 3 4 5 6 WORKSHOP: PAGE: 3 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 2 1 FEDERAL TRADE COMMISSION 2 3 In the Matter of: ) 4 WORKSHOP ON ELECTRONIC RECORDS. ) 5 -----------------------------------) 6 7 JUNE 3, 2002 8 9 Room 332 10 Federal Trade Commission 11 6th Street and Pennsylvania Ave., NW 12 Washington, D.C. 20580 13 14 15 The above-entitled workshop came on for comments, pursuant to notice, at 2:05 p.m. 16 17 18 19 20 21 22 23 24 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 3 1 APPEARANCES: 2 3 ON BEHALF OF THE FEDERAL TRADE COMMISSION: 4 MICHAEL G. COWIE, Assistant Director, Mergers IV 5 D. BRUCE HOFFMAN, Associate Director for Regions 6 DENNIS F. JOHNSON, Attorney, Mergers III 7 GREG BROWN, Computer Specialist 8 Federal Trade Commission 9 6th Street and Pennsylvania Avenue, N.W. 10 Washington, D.C. 20580-0000 11 (202) 628-4000 12 13 PANELISTS: 14 JANET MCDAVID, Hogan & Hartson 15 MARC SCHILDKRAUT, Howrey, Simon, Arnold & White 16 ROBERT COOK, Drinker, Biddle & Reath 17 JAMES W. LOWE, Wilmer, Cutler & Pickering 18 RICH KORBIN, Applied Discovery 19 20 21 22 23 24 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 4 1 P R O C E E D I N G S 2 MR. COWIE: Good afternoon. Good afternoon. 3 This is the first of seven merger best practice 4 workshops. 5 to have a merger remedies workshop on June 18. 6 The mergers workshops are a response to This is a great turn out. We're also going 7 criticism about the burden, the burden of the second 8 request process. 9 burden while at the same time ensuring that the FTC gets 10 the information it needs to make an accurate and 11 reasonably complete substantive assessment of proposed 12 mergers. 13 We are seeking ways to reduce the Today's workshop will focus on electronic 14 records. 15 comment, including criticism, from all of you. 16 do you have input, we would appreciate you identifying 17 yourself and the company or organization you're with, 18 and you could stand up to share your remarks or you can 19 come to the podium, if you feel more comfortable that 20 way. 21 This session is being transcribed. We welcome If you Leading this workshop on the FTC side is Greg 22 Brown, an information technology management. 23 benefit of not being burdened with a law degree or 24 economics degree, so he could have some original 25 insights for us. For The Record, Inc. Waldorf, Maryland (301)870-8025 He has the 5 1 Bruce Hoffman is associate director for the 2 regions, and Dennis Johnson is an attorney in the Bureau 3 of Competition with substantial second request 4 experience. 5 MR. HOFFMAN: Well, hello, everybody. As Mike 6 said, this is the workshop that we're doing on 7 electronic records. 8 discuss specifically kind of two aspects of the world of 9 electronic and electronic records and the second request 10 process. 11 What we wanted to do today was And we've actually broken this down a little 12 more, but in general what we wanted to talk about was, 13 on the one, hand the impact of the increasing volume of 14 electronic documents including Email, word processing, 15 spreadsheets, presentations, databases, et cetera, on 16 the process for complying with the second request, 17 including how people search for records and obtain them 18 and some of the issues that have seemed to come up with 19 increasing frequency in the actual production process. 20 So on the other side of the coin of the 21 electronic records is how -- or really not so much 22 records but the role of electronics is how people 23 produce things to us, i.e., the format a document 24 originally existed in, whether electronic or paper, how 25 we're getting it in terms of producing by way of For The Record, Inc. Waldorf, Maryland (301)870-8025 6 1 electronic image or by file or paper production of 2 electronic documents, electronic production of paper 3 documents, whatever it may be. 4 Our goal here today is to listen to your input. 5 We've identified some specific sub topics. I think 6 we've now reduced it to three that relate to these 7 issues, so what we're going to do is quickly outline 8 those, kind of lay each of them on the table. 9 And then after we introduce these general issue, 10 we're going to turn the discussion over to you, starting 11 by calling on some individuals who we know have had some 12 recent experience with these issues, who we asked to 13 come here today to share some of their thoughts on these 14 documents and then opening up the floor to a more 15 general discussion. 16 And then we're going to try to hold each topic 17 to about half an hour. 18 or so. 19 We have about an hour and a half As Mike said, when you speak, please identify 20 yourself so that we know and so that the court reporter 21 can keep track of who's talking so we can get all this 22 transcribed, and we can then use it in the future to try 23 to hopefully get some good outcomes and make our process 24 work a little bit better. 25 Let me briefly introduce folks who we've For The Record, Inc. Waldorf, Maryland (301)870-8025 7 1 specifically asked to prepare to address these 2 topics: 3 Schildkraut from Howrey Simon; Bob Cook from Drinker, 4 Biddle; Jim Lowe from Wilmer Cutler; and Rich Korbin 5 from Applied Discovery. 6 Janet McDavid from Hogan & Hartson; Marc With that note, let me go ahead and introduce 7 our first topic, which is the impact of electronic 8 documents on the search process, and after I 9 lay it on the table, I'm going to ask our five sort of 10 starting speakers to share whatever thoughts they may 11 have, and we'll see if we have something to add. 12 This general issue is: How should parties 13 search for electronic documents? 14 secret here obviously that the second request process 15 has generated or appears to be generating in some ways 16 almost exponentially larger productions because of the 17 fact that people have exponentially larger sets of 18 documents lying around and most of those things are in 19 the forms of various kinds of Email word documents, et 20 cetera, that people store that are very hard to get rid 21 of. 22 I don't think it's a Searching for these things, as you all know 23 better than I, can be really difficult, and it raises 24 sort of the question of do you do it by term searches? 25 Do you do it by physically reviewing everything that For The Record, Inc. Waldorf, Maryland (301)870-8025 8 1 exists on a company's servers? How do you physically go 2 about finding the documents, and what should the role of 3 the Commission be? 4 And that one specific issue that comes up, if a 5 party wants to do a term search as opposed to reviewing 6 every document that appears on his server and in the 7 hard drives of laptops of its employees, should the FTC 8 be proposing the terms or granting formal modifications 9 of the second request to specify that searches conducted 10 using certain protocols, certain systems, certain terms 11 will be substantially compliant, or should the FTC 12 simply review the terms and point out deficiencies 13 without saying anything else about it or have no role at 14 all? 15 All these things have almost an infinite number 16 of possibilities, and having set that out on the table, I 17 would like to now turn it over to our first set of 18 speakers to say what they may have to say about this 19 aspect of the electronic documents, if anything. 20 don't know if you all have any particular order you 21 would like to go in. 22 MR. COWIE: Why don't we hear from Marc 23 Schildkraut from Howrey Simon. 24 MR. SCHILDKRAUT: 25 I I think in my experience, we have done this three different ways, and I tried it a For The Record, Inc. Waldorf, Maryland (301)870-8025 9 1 fourth way, and that hasn't worked. 2 Three different ways that I think I've done this 3 is, one, I've just had everything printed out, and it's 4 then reviewed as a document. 5 with that is the expense. 6 been absolutely enormous to do something like that. The problem, of course, In some cases the expense has 7 The second way I've done it is have essentially 8 staff attorneys basically review everything on screen. 9 If we have the software that's capable of doing that, we 10 can then select off the screen and, in fact, give it to 11 the FTC in electronic form if necessary. 12 The third way I've done that is, I've done this 13 once, it wasn't in a merger matter, is I essentially 14 said, I will just give you all my Emails and I'll give 15 you a search engine and I'm not even going to search for 16 privilege, and it's a small company. 17 lawyer in-house. 18 privilege anyway, and I just gave the FTC three 19 gigabytes of data, and they can do whatever they want 20 with it. 21 They didn't have a There wasn't going to be much The fourth way I proposed. And I've never had 22 anyone accept this, is we come up with search terms that 23 the FTC would agree to and I was -- I've been unable to 24 get the FTC to come up with those search terms, and I'm 25 unwilling to take the risk myself of doing something For The Record, Inc. Waldorf, Maryland (301)870-8025 10 1 with search terms, so I have to -- you have to do a full 2 review under the circumstances of all the Emails. 3 A substantial problem with most of these 4 approaches is duplicates. 5 Email can go to 20, 30 people at a time. 6 attempted to eliminate duplicates, but it turns out that 7 that means that the FTC is getting potentially hundreds 8 of thousands, I guess in an extreme case, I haven't 9 counted -- it could be millions of documents that are 10 duplicates. 11 MS. MCDAVID: If you send an Email out, an I never This is Janet McDavid Hogan & 12 Hartson. 13 described first. 14 third because of the issue of privileges. 15 matters have involved companies with in-house counsel or 16 had other ongoing litigation, and I don't want to risk 17 waiving the privilege. 18 We have used the two techniques that Marc I've never been willing to try the Most of my We have proposed using search terms, and it's an 19 irony that here we have a giant database capable of 20 being searched by term in a way that might reduce the 21 burden on both the company and on the staff, and we've 22 never been able to arrive at a way of doing so. 23 We proposed search terms for staff and offered 24 them to allow whatever terms they would like. 25 recent matter we estimated that it would have reduced For The Record, Inc. Waldorf, Maryland (301)870-8025 In one 11 1 the burden of Email production or the volume of Email 2 product by approximately 25 percent. 3 But I agree with Marc that in the absence of 4 agreement I essence on the part of staff that this would 5 constitute substantial compliance, no one is prepared to 6 take that kind of a risk so one will have to go back and 7 do the search again. 8 MR. COWIE: All right. 9 MR. COOK: This is Bob Cook Drinker, Biddle. I 10 guess my experiences are very similar. 11 we found is that the practice of actually searching can 12 have a big effect on the ways of searching. 13 One thing that There's two ways of searching someone's E mail. 14 One is get a bunch of people in a room with computer 15 screens and read it to see if it's responsive. 16 ends up being much more time consuming than having the 17 person there helping you go through the Email. 18 It's very difficult to get that kind of That 19 involvement in other types of electronic documents 20 because you know if you have folders where you have X 21 subject and it has nothing to do with the subject on the 22 second request, it's highly unlikely that -- you can 23 certify. 24 responsive, then you don't have to go through every 25 document in that folder. If you as a person can certify that that's not For The Record, Inc. Waldorf, Maryland (301)870-8025 12 1 And then whereas if you have just people coming 2 and looking at your Email, they have to look at every 3 document in there in order to determine if it's 4 responsive, and that ends up being a huge burden and 5 then in the system, increases the number of documents 6 that have to be processed and searched for things like 7 privilege, which can again increase. 8 for privilege increases the burden tremendously in 9 complying with the second request. 10 Having to search So every document that is put into the system 11 must be reviewed by somebody to determine if it's 12 privileged. 13 be an easy matter to go ahead and just produce 14 everything, so that every extra document creates this 15 extra time, and it ends up being a huge burden and a lot 16 of I guess friction in a sense in the engine to make 17 people produce documents that don't have to be produced 18 and arguably are necessary. 19 MR. COWIE: If it were not for that, I think it would Am I understanding you three 20 correctly that we should think more flexibly about 21 accepting Email productions based on defined search 22 terms? 23 this problem? 24 25 Is that what you're proposing as a solution to MR. SCHILDKRAUT: I don't know that there's any one solution to the problem. I think search terms are For The Record, Inc. Waldorf, Maryland (301)870-8025 13 1 important, are one potential way to go. Another way to 2 go is simply to cut down very substantially on the 3 number of people who's Email you're going to look at. 4 You can only look at so many people's Email in 5 any event. 6 down in terms of number of Emails, people's Emails 7 you're going to look at, you will cut down radically on 8 the size of the second request response. 9 I mean, I think if you just try to cut that MS. MCDAVID: You could also significantly cut 10 back perhaps on the time period covered for Emails 11 without cutting back on the time period for other 12 textual sorts of documents. 13 For example, for strategic planning documents, 14 it may be perfectly reasonable to go back for a longer 15 period of time. 16 become stale since they tend to deal with ongoing 17 current events, so you have a shorter search period. 18 might also significantly reduce the burden, although I 19 do endorse Marc's notion of reducing the number of 20 custodian searches. Emails tend to be much more likely to It 21 We have also had some recent experience in using 22 technology to de-duplicate E mail production files, and 23 only to eliminate absolutely identical Emails because as 24 has been pointed out, the exact same Email will show up 25 in the files of every recipient either as a to or cc or For The Record, Inc. Waldorf, Maryland (301)870-8025 14 1 even a BCC, and that reduced production in one estimate 2 by as much as 30 percent but at some fairly significant 3 expense. 4 MR. HOFFMAN: My question about that, Janet, 5 is: Does the benefit to you, of the parties, of 6 producing duplicate justify the cost that's involved? 7 8 9 MS. MCDAVID: Bruce. I don't know the answer to that, I think it's quite possible. MR. SCHILDKRAUT: There is one reason with me -- 10 I've never done it, but there was one reason we thought 11 of doing it, and it's an ironic sort of reason. 12 have 20 Emails saying the same thing and it's a 13 privileged Email and you have different people reviewing 14 for privilege, you could stop the 19th time and 20th 15 time, it will still get through, so that's the reason 16 we've actually thought of doing it. 17 do with the money. 18 19 20 MS. MCDAVID: If you It has nothing to Plus you have to log it 20 times on your privilege log. MR. LOWE: Jim Lowe from Wilmer Cutler. We've 21 had experience de-duping where it was about a 30 percent 22 cut as Janet said, and in a large production the most 23 expensive thing is the reviewing time. 24 expensive than the technology, and it is therefore -- 25 you can save a lot of money for the parties in review For The Record, Inc. Waldorf, Maryland (301)870-8025 People are more 15 1 time and obviously the privilege issue that Marc and Jan 2 raised. 3 The issue that was raised to us by the staff, 4 and we ultimately didn't do it, was the issue of being 5 able to find documents for the individual who sent them 6 because you don't know which copy is going to get 7 re-dupped and which copy is actually ultimately going to 8 be reproduced. 9 At least the output, the output is a recoverable 10 problem because the medi-data is readable, and 11 indexable, so you can simply create an index from all 12 Email from X person even if they're showing up in Y 13 files. 14 that information will be available to the Commission. 15 Particularly if you're producing electronically, MR. BROWN: I think when we're talking about 16 duplicates, I want to mention, everybody has to be 17 talking about the same thing, and to just throw out the 18 term generically duplicate, I don't think it is 19 necessarily accurate to say the text is the same and 20 that electronic message is the duplicate. 21 I think there are some vendors here probably 22 that may be able to speak to that. At some point we can 23 talk about what truly -- what are we considering when 24 we're saying it's a duplicate. 25 same text? Are we saying it's the Are we saying the medi-data throw, that out For The Record, Inc. Waldorf, Maryland (301)870-8025 16 1 and we're just looking at the text, the relationships, 2 the time at which someone may have opened an Email? 3 Those may or may not be factors, but we should 4 at least make sure that we're talking about the same 5 things when you get to a discussion. 6 MR. COOK: Well, our experience de-dupping is 7 the same, but sitting hear listening to this 8 conversation, I think there may be another way of 9 addressing the Email, and I reserve the right to say I 10 was completely insane when I said this because it just 11 came to me. 12 But for people who are not at the highest level 13 of the organization, this same technology that allows us 14 to de-dup would allow you just to produce for lower down 15 people the Emails that were to or from or copied to 16 certain people within the organization rather than all 17 Emails they have because frankly the Email traffic among 18 people that are three or four tiers down within say the 19 sales organization is not going to be necessarily very 20 probative on an antitrust matter. 21 It's going to be the stuff that get circulated 22 higher up, and that may be a way of filtering 23 information without having to rely on things like search 24 terms that make people uncomfortable. 25 MR. JOHNSON: What you're saying is to do For The Record, Inc. Waldorf, Maryland (301)870-8025 17 1 something like Marc Schildkraut was suggesting, 2 basically reduce the number of people you're searching 3 for. 4 MR. COOK: Even if you didn't completely reduce 5 the number of people, you could search completely the 6 top level of the organization, and then for levels down 7 you could take only the Email that has someone at the 8 top level of the organization or one of your key people 9 that's been selected in the negotiating process, only 10 those Emails and not Emails that involve persons who 11 aren't on the hit list assuming that the hit list has 12 been agreed to. 13 That would be a way of reducing the amount of 14 raw Email that was produced and has to be processed. 15 MR. COWIE: We have a question from the back. 16 MS. LLEWELLYN: My name is Virginia Llewellyn. 17 I'm a colleague of Rich Korbin Applied Discovery, whom 18 you introduced. 19 I think the thing that's interesting about this 20 conversation is the fact that something that surprises 21 me -- actually it sounds like a lot of people having 22 this discussion have already made that leap from talking 23 about paper document review to talking about some form 24 of electronic review, and the type of service that a 25 company like ours provides is well the state of the art For The Record, Inc. Waldorf, Maryland (301)870-8025 18 1 technology that allows the review team to get through 2 this information much more efficiently than the old 3 paper review but also accomplishes some of the things it 4 sounds like you're trying to accomplish with what is 5 sort of a halfway there electronic review, it sounds 6 like. 7 And certainly correct me if I'm wrong, but it 8 sounds like most of the people in the audience who are 9 trying some form of electronic review are doing that in 10 the native format, of the file type, so I think Outlook 11 Email is the most common example. 12 that in a Microsoft program and try to use the 13 functionality or the features of that software to get 14 through the review. 15 further than the paper review, but it still presents a 16 lot of problems. 17 A lot of people use Now, I think that that's one step The real state of the art technology would 18 encourage you to review all file types no matter what 19 type of document it is, whether it's an Outlook Email, a 20 Word document, an Excel spreadsheet, no matter what it 21 is, review all those electronic file types in one 22 standard format. 23 And the most common format and the format that's 24 accepted by courts, should you have to go to litigation 25 at one point, is PDF, and the good thing about For The Record, Inc. Waldorf, Maryland (301)870-8025 19 1 searching, and the reason that's really relevant to this 2 first topic that we're discussing, is the fact that PDF 3 preserves 100 percent of the text of every original 4 document. 5 It doesn't matter whether it's an Email, a memo, 6 a letter, a spreadsheet. 7 You can search all of that material very quickly with a 8 sophisticated search engine. 9 medi-data. 10 down the scope of the documents you have to review very 11 quickly by simply entering a search term and pressing a 12 button instead of conducting a manual review. 13 It doesn't matter what it is. You can search the You can search the text. You can narrow So while certainly it's ideal to narrow the 14 scope of the custodians you're looking at, narrow the 15 scope of the time period, the fact is the technology 16 exists to really allow you to do that much more cheaply, 17 much more efficiently than a lot of the processes that 18 are currently in use. 19 MR. COWIE: In that regard, let me assert a 20 proposition and invite some you out there to tell me why 21 I'm wrong or oversimplifying things. 22 the case that companies for risk management reasons are 23 becoming more effective in forcing employees to delete 24 Email. 25 It appears to be Companies are getting better at imposing For The Record, Inc. Waldorf, Maryland (301)870-8025 20 1 involuntary record retention systems. As a result, 2 we're often confronted with situations where a company 3 has only two or three or four months of Email. 4 At the same time, it seems like a number of 5 companies have relatively sophisticated back-up or 6 storage systems. 7 company is essentially taking a picture of all the Email 8 at different points in time. Sometimes these are situations where a 9 So we might be gathering fact pattern where we 10 evaluated a second request negotiation and we see the 11 company has two or three months, only two or three 12 months of live Email. 13 of information on back-up or storage tanks. Yet they have two or three years 14 That being the case, it seems rational if not 15 perfectly sensible for the FTC to insist on looking at 16 the storage records as well as live Email. 17 something flawed with that approach? 18 MR. SCHILDKRAUT: Is there Well, Marc Schildkraut. It's 19 the cost. 20 half dozen years, the FTC and the DOJ has not required 21 search of the back-up systems because every time I've 22 gone through this, the cost estimates of what was 23 required to do that are absolutely enormous. 24 25 Most of the time over the last I would say This requires restoring back-up tapes, then reviewing those back-up tapes and what you have when you For The Record, Inc. Waldorf, Maryland (301)870-8025 21 1 have back-up tapes some people are doing back-up tapes 2 once a day, some once a week, once a month, and they 3 have to rest the system so you may have daily back ups 4 for 30 days and then monthly backups and then semiannual 5 and things like that. 6 You get, first of all, an enormous amount of 7 duplication because people haven't deleted things from 8 their system and it's backed off every day. 9 have the exact same chain of Emails 30 days in a row. 10 The last time I had to go back ups and go to the back-up 11 tapes, the company had multi years of back-up tapes. 12 I had to build a computer center, of course, You can 13 several million dollars. 14 that center. 15 computers continually, and their only job was to push a 16 button that basically said print, and it then went to 17 hundreds of staff attorneys in order to review that 18 information, most of which was going to be duplicative 19 of other information. 20 I had 30 to 40 computers in I had 30 to 40 people manning those The good news is people don't do that much 21 anymore. It tends to be the case now that when I talk 22 to companies, they only have about 30 days worth of 23 backups, and the purpose of the back-up is essentially 24 to restore from a catastrophic loss, not to create an 25 archive so that people can go back to these back-up For The Record, Inc. Waldorf, Maryland (301)870-8025 22 1 tapes in almost all systems. 2 People find Emails that they want to save, they 3 can save them themselves to their hard disk, and those 4 we've always offered to provide to search if people had 5 thought it important enough to save a particular Email. 6 The extent of doing back ups is just so enormous 7 I find it hard to believe that the benefit for the FTC 8 is great enough to force that cost on people. 9 MS. MCDAVID: Let's remember that this is not a 10 cartel investigation. 11 investigation, so let's keep it in context. 12 points that Marc made are absolutely valid. We're talking about a merger All the 13 The issue of back-up tapes comes up not just in 14 the circumstance you've posited, Mike, but also in the 15 situation in which the company has purged its Emails, 16 has Emails going back a year, two years, three years, 17 and you can understand that the back-up tapes are a 18 great big bin into which everything for that time period 19 has been thrown, not just the Emails of the 35 20 custodians that you want to have searched but 21 everything. 22 And therefore you first have to restore the 23 back-up tapes and then go through the process of 24 identifying the custodians whose data are on those 25 tapes. For The Record, Inc. Waldorf, Maryland (301)870-8025 23 1 There also have been, in my experience, fairly 2 significant technological problems in restoring these 3 back-up tapes adequately. 4 where a client attempted to restore a back up tape, they 5 found to their horror that they didn't actually contain 6 anything usable after some significant expense of 7 attempting to do so. 8 MR. JOHNSON: In at least one instance The back-up and archive issue is 9 sort of the second topic that we wanted to get into 10 here, and it's already been sort of introduced, but let 11 me try to lay out in general the issues we would like to 12 have people focus on here if we could. 13 With the increasing prevalence of back-up and 14 archive copies of electronic materials now, along with a 15 wide variation among companies and document preservation 16 policies, what we would like to try to figure out is 17 what the Commission's general approach should be to 18 letter searches of back-up and archive materials and in 19 particular what kind special or unusual circumstances 20 might warrant a departure from those general approaches 21 one way or the other from whatever they might be. 22 We would be interested in focusing you on how 23 the Commission should evaluate party claims and value of 24 expense. 25 need to be thinking about clearly. Clearly you've indicated those are issues we For The Record, Inc. Waldorf, Maryland (301)870-8025 24 1 We would like to know how likely it is important 2 information will exist only in back-up tapes or are 3 they -- is the information accessible in other -- in the 4 regular files as well, and are there approaches that can 5 account for both the parties' interest in avoiding 6 unnecessary burden and expense in this regard and the 7 Commission's need to make sure it has access to all the 8 important information and documents that we need? 9 Just on a related note, we would be interested 10 in finding out how the Commission should handle 11 situations where a party -- at some point in the 12 relatively recent past we upgraded or changed its 13 information system resulting in some documents that had 14 data that presided only on legacy systems rather than on 15 existing system. 16 Bob? 17 MR. COOK: This is Bob Cook. I would just give 18 you my opinion on the back-up issue, and I would think 19 the legacy system issues are very similar, similarly. 20 All that's really appropriate I think in the second 21 request context, my opinion, is to have a tape or a 22 closed set of tapes that should be maintained. 23 There may be back-up tapes. There may be 24 hundreds of back-up tapes for various systems within a 25 company. It's not practical to search them. For The Record, Inc. Waldorf, Maryland (301)870-8025 It could 25 1 never happen. And there are -- the real interest to the 2 investigation is an uncovering I think things that are 3 related to the transaction in the second request context 4 because if in the ordinary course of business people do 5 not maintain a certain type of document, that wouldn't 6 be preserved anyway, and it's part of the document 7 retention policy that all companies have. 8 It's reasonable to want to go back at some point 9 and look for it, and that's why maybe a monthly back-up 10 tape, whatever the main back-up tapes are, to have those 11 preserved, but to require companies to stop overriding 12 any back-up tapes on an ongoing basis could be very 13 burdensome as far as the cost of the tape itself. 14 And the new back -- the new Email, people aren't 15 generating Emails once the second request goes out that 16 say, Let's increase price and reduce output, so it's 17 really only for a second request. 18 immediately prior to the antitrust lawyers getting 19 involved are really the only ones that could possibly be 20 interesting in my opinions, and measures to have huge 21 document retention obligations or huge searching 22 obligations other than that I think are simply adding 23 cost. 24 25 MR. HOFFMAN: Documents that are Let me try to make sure you're trying to propose -- you're saying, what we ought to be For The Record, Inc. Waldorf, Maryland (301)870-8025 26 1 doing is whether it's in tape form or whatever mag tape 2 or whatever the format is, whatever the last snapshot is 3 prior to the HSR filing, you just kind of hold on that 4 while the company goes ahead with its standard practice 5 of reviewing further archives as part of second sweeps. 6 MR. COOK: Typically these things are rotated. 7 You might have 12 tapes that you rotate through a month 8 or through a year, so you wouldn't jump in necessarily 9 right away. 10 because that snapshot would be preserved because you 11 would be overriding the one from before you even 12 considered the transaction the day say before the second 13 request was issue the day after. You would still have the grace period 14 MR. HOFFMAN: 15 removing that tape. 16 MR. COOK: You're talking about physically You have to take it on the rotation. 17 These tapes aren't cheap because in itself, but because 18 that's burdensome but less burdensome than trying to 19 store an entire company's Email system. 20 21 22 MR. HOFFMAN: You said your proposal is a search -- that it's not required to substantially comply. MR. COOK: I would suggest not. I would suggest 23 that it would be more appropriate to have it available. 24 If, in fact, litigation commences it would be necessary 25 to do the discovery. For The Record, Inc. Waldorf, Maryland (301)870-8025 27 1 MS. MCDAVID: It seems to me that the 2 presumption should be against back-up tape restoration 3 absent some extraordinary circumstance that justifies 4 some deviation from that presumption. 5 MR. COWIE: Janet, this is Mike Cowie again. 6 sounds like we're hearing two reasons for the 7 presumption. 8 used only for cartel investigation. 9 One is you suggested that Email should be MS. MCDAVID: No, I didn't suggest that. I said 10 remember that this is a merger investigation, not a 11 cartel investigation in which you're looking for 12 evidence of coordination between the companies. 13 It MR. COWIE: The implication is that Email might 14 say, Meet me in the hotel room so we can fix prices, and 15 for a merger investigation we should be less interested 16 in that kind of chatty Email type conversation. 17 the premise that we might pause to consider. That's 18 Arguably people are using Email today to make 19 presentations to senior management, to make high level 20 sales pitches to customers, to summarize expansion 21 plans, so that's one issue, how are people using Email 22 and is Email merely something we should use for cartel 23 investigations or are they pertinent to mergers 24 investigation? 25 MS. MCDAVID: I never said use it only in For The Record, Inc. Waldorf, Maryland (301)870-8025 28 1 cartel. 2 misconstrued what I said. What I said was let's just 3 remember the context here. This is not a criminal 4 proceeding. 5 You're being a good litigator, but you've The point I made was that Email tends to be more 6 time sensitive and are less likely to be the place in 7 which a company will memorialize truly important 8 business discussions, which are more likely to be found 9 in other kinds of the electronic or written documents. 10 And under the circumstance, I didn't say ignore 11 Email all together. 12 time period for your search for Email than you might 13 have for a three-year time period that is the norm for 14 document production in response to a second request. 15 MR. COWIE: I said try considering a shorter Janet, your view has been stated 16 repeatedly by others to us as well, and I certainly 17 don't intend to minimize its importance. 18 serious view for merger investigations we should be 19 focused on data, not Email. 20 worth considering. There is a I think that is something 21 The other reason I heard for presumption 22 articulated by Marc Schildkraut is just the cost, is the 23 cost. 24 to be an empirical question. 25 It's too costly to do back-up tapes. That seems I would be interested in hearing from any For The Record, Inc. Waldorf, Maryland (301)870-8025 29 1 vendors or Greg Brown, from Greg Brown or anyone else 2 that has any input in this data empirical question. 3 MR. KORBIN: Rich Corbin for Applied Discovery. 4 What we typically see for back-up tapes ranges in a 5 thousand dollars per restoration of the tape. 6 take longer obviously depending on hourly billables that 7 are in systems. 8 It can One of the things you have to keep in mind 9 though is that back-up tapes are not just for Email. 10 They're also for the server, and the server could 11 contain all different kinds of lose files which would be 12 Word documents. 13 A lot of people do back-up their information not 14 to much on their local hard drive but on the server of 15 the company, so it's just Emails. Keep that in mind. 16 I do agree with Bob Cook though that it's not 17 necessary to go back and look at all the back-up tapes 18 for a year. 19 weeklies and we can de-dup off. 20 dailies, you're just piling Emails on for a new day on 21 top of that last back-up tape. 22 What we typically do in our cases is we do If you're doing And we can go and take off all the old data so 23 you're only getting the new data off of that new back-up 24 tape so we recommend to our clients to do it about once 25 a week or if they're going back six months, do the For The Record, Inc. Waldorf, Maryland (301)870-8025 30 1 monthly tapes but usually that cuts down the cost and is 2 more sensible to the clients. 3 MR. BROWN: I would like to mention I think in 4 general we've had these discussions of burden, and we've 5 run across a situation where there is a claim this is 6 too oppressive a task to take on. 7 experience that we do go through some level of 8 negotiation in trying to reduce the cassette tapes, 9 trying to target a particular time frame that may give 10 us the snapshot that we're looking for. 11 It's been my Ultimately you have to have knowledge of what an 12 organization's policies are, what their retention 13 policies are, what their back-up policies are, what 14 their disaster recovery plans are if you're going to 15 make the genuine effort at negotiating some of this 16 burden down, and I would just like to say that many 17 cases are unique for a variety of reasons, but the most 18 important thing to me would be that in the process, that 19 the IT people responsible for these back-ups or 20 responsible for the underlying support services for the 21 organization could talk with the IT people here and come 22 to an understanding of what is possible, what is 23 reasonable, what maybe can get us to this point together 24 where the agency can feel confident that they are 25 getting the data they need to perform the investigation For The Record, Inc. Waldorf, Maryland (301)870-8025 31 1 and the burden that is placed upon the parties to 2 minimize as much as possible. 3 MR. LOWE: Jim Lowe again. I want to address 4 the latest question because we haven't touched on this. 5 In the post Y2K situation, we have a lot of companies 6 that completely switched out their systems in a 7 relatively recent period of time, and in many cases we 8 have found there are no people left at the company that 9 know how to operate the prior systems, and those systems 10 are not available to the company either at all or 11 certainly not in the ordinary course. 12 And I think that the Commission should be -- 13 should very rarely and even then have thought very 14 carefully about asking for people from systems where the 15 computer does not have access to those terms in the 16 ordinary course, namely that for them to restore them 17 for themselves could be enormously burdensome. 18 asking a tremendous amount of the company to restore 19 those systems when they would not have access to that 20 data anyway because they no longer have the employees or 21 the systems to locate that data themselves. 22 That is They just are pack rats and happen to keep tapes 23 around from a preexisting system which for whatever 24 reason, I think many of us have found that companies do 25 even when you say to them, why did you keep the tapes For The Record, Inc. Waldorf, Maryland (301)870-8025 32 1 and they say, because, and there is no reason. 2 And I think that that same question goes in some 3 way as to the back-up tapes. 4 distinction between back-up materials that are available 5 depending whether you want to call them a hot site or a 6 semi hot site which is intended to be backups that are 7 available to restore the system should there be a 8 crisis. 9 There is increasingly a Of course back-up tapes that are stuck in some 10 warehouse somewhere do require often more burden to load 11 than the stuff that is back up for a hot site or 12 equivalent set up, and there may be substantially 13 different costs in those things and some explorations 14 can be done of that. 15 I agree with the notion of having the 16 conversation very early between technologically 17 knowledgeable people rather than the lawyers can be very 18 useful to get this resolved, but it does not to get 19 resolved. 20 And one of the things Marc and Jan was getting 21 at earlier, one of the reasons why a number of us have 22 not tried the search term method is that the notion of 23 negotiating for a long period of time over the search 24 terms without any clear notion that we'll be able to 25 reach agreement, and meanwhile time is passing, it is For The Record, Inc. Waldorf, Maryland (301)870-8025 33 1 simply not worth it to most of our clients to sit there 2 and spend that time. 3 They would rather go ahead, print the stuff out 4 and have us review it than have us say, We don't know 5 whether we can reach agreement on that, and it may take 6 three or four weeks to have this discussion. 7 never occur unless the Commission is prepared to make 8 decisions and put them on people and say, We are going 9 to stand by this in terms of substantial compliance. 10 MR. COOK: That will Following up on that, this is Bob 11 Cook again, it's important to remember when we're 12 dealing with electronic documents that the pipeline 13 takes longer for the documents to go through before it 14 gets to the Commission because more processing is 15 involved. 16 quickly once you collect it and copy it and reviewing 17 papers and having people review it and then producing it 18 on paper. 19 days relatively easily. 20 Paper actually you can go through pretty That probably could be done in a week to ten The pipeline for electronic stuff could be done 21 in maybe ten days to three weeks. 22 weeks. 23 get accommodations on what I call the 14-day refreshment 24 rule in the second request because it can take longer to 25 process documents electronically and prepare them for It takes longer. It takes maybe two You need really -- often you For The Record, Inc. Waldorf, Maryland (301)870-8025 34 1 production in electronic format if you're doing that. 2 And it's also more cumbersome to make changes 3 midway, so once you start talking about not knowing when 4 you start what you're going to be doing can get into 5 more trouble when you're dealing with electronic 6 documents even than you do with paper. 7 MR. HOFFMAN: Let me turn back to the search 8 terms again for a second because we sort of went around 9 that a little bit. 10 terms, and I've seen cases recently where search terms 11 have been used with varying results but I would ask this 12 to everybody. There's a lot of advocacy for search 13 Obviously with second requests there's 14 information asymmetry between what the parties know and 15 what the Commission staff knows. 16 negotiating scope of search by people, by focusing on 17 people whose titles we can recognize and talking to the 18 parties about what they do and so on and so forth so 19 that a relative short period of time and also with 20 additional industries that we're more familiar with, for 21 example, in theory we ought to be able to reduce the 22 scope of the search pretty quickly and pretty 23 effectively. 24 25 We deal with that when Term searches to me seem to be a little more difficult in that regard because particularly as the use For The Record, Inc. Waldorf, Maryland (301)870-8025 35 1 of electronic documents and Emails has mushroomed, the 2 terms that people use to describe things have changed 3 pretty fast, and I don't have a lot of confidence that 4 we have a great deal of understanding about the internal 5 terminology that we use to describe things, and for 6 example, where parties refer to their rivals by like 7 their stock ticker symbols and stuff like that and you 8 have a very difficult time thinking of a term search 9 that would come up with critical documents. 10 On the other hand, it seems to me that a 11 physical review of a number at the gigabyte set of 12 servers every single time you do second request would be 13 pretty burdensome. 14 things? 15 scope of search reductions for people to come up with 16 some methodology for using term searches that we can 17 live with that wouldn't put large risks on the 18 Commission? 19 really frankly would have no way of knowing whether we 20 were after it or not. 21 MS. MCDAVID: How do we reconcile these two How do reapply the lessons we've learned about We would be agreeing to things that we Certainly one possibility which is 22 also relevant to all of the negotiations or the scope of 23 the second request is the extent to which the parties 24 have been cooperating with the staff prior to the filing 25 and prior to the 30 day waiting time. For The Record, Inc. Waldorf, Maryland (301)870-8025 36 1 If the staff has been given a lot of data by the 2 companies during that period to get them down the 3 learning curve, then they are in -- they are in a 4 position to agree on a set of terms than they would be 5 if they were totally in the dark, and anything in 6 between might be possible, but in a circumstance in 7 which there has been production from a substantial 8 number of documents in advance, witnesses may have been 9 available for interview, counsel have been available on 10 the phone along with business people, over the 30-day 11 time period, it seems to me to be more reasonable to ask 12 staff to add to a set of search terms. 13 Bob made an interesting point, which I think we 14 didn't hadn't focused on here and that is 14-day 15 refreshment rule. 16 documents than it is for hard copy documents. 17 from a requirement to refresh your search, which is 18 something that I also find fairly objectionable in 19 circumstances in which we are undertaking production of 20 documents, but let's park that for a moment. That is a bigger issue for electronic If you 21 You can leave a box on the executive's desk and 22 tell them to put things in it as things happen over the 23 period between when they were searched and when you have 24 the refreshment, you can't do that with electronic 25 documents unless you ask them to print everything so it For The Record, Inc. Waldorf, Maryland (301)870-8025 37 1 requires revisiting the clients' offices and researching 2 their files at significant additional expense and cost 3 and time and it's certainly something you should take 4 into account in terms of the refreshing requirement of 5 electronic input. 6 MR. COOK: On that 14-day rule, I have twice at 7 least been able to convince people here at FTC and also 8 the DOJ that if we're going to do a rolling production, 9 which is better for the agencies but it's more costly 10 but it's cheaper to do it as one production, then it's 11 reasonable to say once I produce Jane Doe's files and 12 they're complete and fresh, when I produce them then, 13 that I shouldn't have to go back and research Jane Doe 14 although there may be certain people within the 15 organization that they're going to want refreshed. 16 I mean, I personally think that few people start 17 to create nasty Emails and documents after the second 18 request goes out so I'm not sure if it serves a great 19 function anyway. 20 in the company, but I'm not sure that that's a really 21 useful thing. 22 It might be for the top three people It's probably more of a hardship. MS. MCDAVID: There probably needs to be some 23 understanding that compliance would be in a reasonable 24 time frame so all production is reasonably fresh, but 25 under those circumstances I agree with Bob completely, For The Record, Inc. Waldorf, Maryland (301)870-8025 38 1 and in fact the merger process handbook that the ABA 2 wrote with the assistance of the agency describes this 3 no requirement to refresh as a modification that is 4 routinely granted but it is is an act. 5 MR. LOWE: In response to Bruce's question, I 6 think one of the things that the Commission might think 7 about is identifying certain people in the search group, 8 particularly lower level people that it is willing to 9 accept search terms searching for because those people 10 are less likely to have responsive Email or that any 11 Email they may have that is of import from a perspective 12 of the investigation would be found in the Email of 13 higher level individuals where you might not accept 14 search term searching for those individuals. 15 But it's important to note and this is the 16 context of the back-up tapes. The burden on the Email 17 is not the production of the Emails. 18 review of the Email for responsiveness and privilege 19 where enormous expense comes in, so the effort to reduce 20 that not only reduces the volume of paper that the 21 Commission gets which as people noted here is often in 22 the Email case duplicative across all the individuals in 23 the search group, but also reduces the volume of the 24 paper for both sides to deal with at the end of the 25 process. For The Record, Inc. Waldorf, Maryland (301)870-8025 It's also in the 39 1 MR. HOFFMAN: Recognizing that, it sounds to me 2 like what the general consensus is for Commission staff 3 to be willing to agree to a modification along the lines 4 if you run a search in your database, whatever form it 5 may be, using the following terms and connectors and if 6 you need some software to run the search because you 7 have cross platform searches, that sort of thing using 8 this software, that would be deemed substantially 9 compliant without regard to what you might find. 10 In other words, it's kind of a methodological 11 search that says even for example -- the underside of it 12 is if we were wrong about these terms, and we have 13 missed huge categories of important stuff, that's okay, 14 you're still going to be in substantial compliance. 15 There is a significant risk there. I think what 16 Jan is suggesting is a way to alleviate that risk, but I 17 have some question about how well that will work, and I 18 would like to get as many people's thoughts on that as 19 possible. 20 Another possibility is to say the Commission can 21 take the position -- staff lawyers can take position on 22 particular transactions that this is kind of be at your 23 own risk type method which I know has generated some 24 negative feedback, so far but I want to hear more of 25 about this. For The Record, Inc. Waldorf, Maryland (301)870-8025 40 1 We won't rule out a term search and if you feel 2 reasonably comfortable, the parties feel reasonably 3 comfortable you're going to capture the bulk or 4 sufficient documents to be in substantial compliance, 5 that's fine, and we'll work with you to formulate it to 6 the extent that we can, but we can't sign off on it as a 7 modification because we don't have enough information to 8 know if the terms to which we are agreeing are the terms 9 set out at the beginning point of the production leaving 10 aside again what you could do with the first 30 days. 11 Which of those two approaches, let me ask this, 12 is the second approach workable at all or is it simply 13 never going to work? 14 MS. MCDAVID: 15 MR. SCHILDKRAUT: You have to understand what 16 substance compliance is. It's full compliance unless 17 you have an excuse and which the agency accepts. 18 mean, how is our using a search term going to be an 19 excuse which the agency will accept? 20 you can do that. 21 MS. MCDAVID: Never going to work. I So I don't see how The risk to the parties in that 22 circumstance is the next day or worse three weeks later 23 into the 30-days the staff comes back and says, Got 24 you. 25 Now, go do it again. MR. GLEKLEN: John Gleklen from Arnold & For The Record, Inc. Waldorf, Maryland (301)870-8025 41 1 Porter. 2 discussion is something in particular in front of the 3 Commission that this is not the same thing as civil 4 discovery. 5 able to produce these documents. 6 I think the thing missing from this entire This is not the last time you're going to be The point here is to find enough information to 7 know whether you should be able to go to court and 8 particularly given the standard applied in the case of 9 the Federal Trade Commission for getting preliminary 10 injunction, the idea that there might be one three year 11 old Email out there that you're not going to get if you 12 do search terms, you're not going to go to court or not 13 go to court based on finding that one Email. 14 Doing a reasonable list of search terms, there 15 are ways we can do this. 16 what the parties agree to do is, Look, we will give you 17 all of the documents for let's pick five people in 18 different areas of the organization. 19 the documents and we'll use these documents to agree 20 upon a search list, so you'll know if the parties are 21 using stock ticker symbols or acronyms and things like 22 that. 23 MR. COOK: In regular civil litigation We'll give you all I would agree with that. One problem 24 is that it's possible in some cases at least that the 25 time required to negotiate the search term could be For The Record, Inc. Waldorf, Maryland (301)870-8025 42 1 perceived by the parties in the transaction as 2 disadvantageous because these are multi billion dollar 3 transactions often that get investigated through this 4 process and create these problems. 5 And although these are huge burdens and people 6 hate them, they would rather undertake the burden than 7 to see this huge deal crater, and at stake is often the 8 viability of the target because if you have a huge 9 second request, it delays things, a lot of uncertainty 10 and people start to leave, and then it doesn't go 11 through. 12 It can actually hurt the competitive bidder of 13 the target and end up creating harm to competition 14 because the transaction did not go through, so that's 15 something to consider. 16 MR. HOFFMAN: Why don't we switch gears on that 17 note to the third topic that we talked about a little 18 bit, which is the format of production,, hopefully we'll 19 be able to talk about that and have time after that to 20 get thoughts from anybody on all the topics, but I 21 wanted to have Greg lay out on the table some of the 22 issues that we've been experiencing on how things get 23 provided to us. 24 25 MR. BROWN: Over the past I guess several years, we've been receiving productions that have been For The Record, Inc. Waldorf, Maryland (301)870-8025 43 1 increasingly electronic in their nature. We've gone 2 from entire paper in the traditional investigation to 3 investigations where the second request response has 4 some electronic files included along with the paper that 5 we had. 6 We've also moved to areas where we image -- the 7 entire production has been actually scanned and imaged 8 with graphic data captured by the vendor and provided to 9 the Commission. 10 summaries and load files to be able to place it into a 11 litigation support application, for instance, like 12 summation. 13 documents that have been used that are actually off 14 site. 15 proprietary software to look at the universe of 16 documents as they're imaged as in their native formats. 17 We have particular issues and discussions that 18 deal with Email and whether or not we get Email that is 19 printed or we get Email in its native format and how is 20 the child parent relationship preserved with 21 attachments. 22 entirely electronic and they're CDs of PowerPoint, 23 Excel, Outlook, Word files, anything that they've had 24 and they've just had hundreds and hundreds of CDs come 25 in. The graphic information are document There are certainly repositories of We've used that in some matters and we've used We've gotten some productions that are For The Record, Inc. Waldorf, Maryland (301)870-8025 44 1 We've attempted to shortcut this in some 2 instances by having productions made to large archives 3 that will send out -- give us information, but there's 4 issues of indexing, of how we know what's there, how you 5 know what you've given to us, how are these files usable 6 both to the Respondents and to the agency itself. 7 So we're looking for ideas for best practices in 8 this area, particularly when companies and Respondents 9 have realized the benefit of providing image in 10 electronic productions when they have to produce to 11 multiple parties or if the States are involved in some 12 say, certainly an opportunity to cut costs but how do we 13 get the information that we need to look at the 14 document, what kind of problems are you having in 15 producing those? 16 MR. COOK: This is Bob Cook. We did a massive 17 production that was paperless earlier this year and late 18 last year where I guess we had a consultant who is not 19 present here SV Technology which set up with a vendor 20 that they used an Internet site that the FTC staff could 21 use the Internet, log into a secure site. 22 I think we had two log ins and view documents 23 that were rendered in a format that was in appearance 24 similar to a printed say Outlook Email or just the 25 native Word format for spreadsheets, and these were also For The Record, Inc. Waldorf, Maryland (301)870-8025 45 1 electronic documents text searchable which relieved us 2 from our indexing requirements because of the text 3 searchability. 4 The feedback that we got was that this worked 5 for the staff. 6 reviewing documents in multiple locations, say three 7 locations, maybe four in the U.S., and if you've ever 8 done that and had to ship Fed Ex boxes all over the 9 place, it's $100 a box, and they drop them and they 10 burst open and you have all kinds of nightmares like 11 this. 12 It worked for us because we were You really don't want to do that. It's very 13 expensive. If you think about every piece of paper 14 being copied costing a certain amount of money, it's 15 much better to do it electronically. 16 The primary advantage to me in negotiating the 17 second request modifications for the system that we use 18 which was Internet based was that it did not require 19 special equipment or special software on the FTC's side 20 so that it was something we could sell. 21 They could try it out. We also offered to 22 produce in the first batch paper as a fall back. 23 important too because nobody wants it if it doesn't 24 work, and it ended up that it did work. 25 That's I think the advantage for the government for For The Record, Inc. Waldorf, Maryland (301)870-8025 46 1 this is there's no paper, and everyone knows what it's 2 like going through those halls and seeing the paper 3 piled up to your shoulders and your head, and everybody 4 knows what it's like on the private side. 5 It's depressing being in the document room for 6 months at a time, and the documents accumulate, and it's 7 not conducive to good work habits I think, and ways of 8 eliminating the paper from the system are probably to be 9 encouraged. 10 MS. LLEWELLYN: Virginia Llewellyn from Applied 11 Discovery again. 12 taking that one step further is the concept that 13 everything is really moving toward the Internet and 14 again in speaking with the people at the Federal 15 Judicial Center who educate our federal judges and 16 talking about where the courts are going with this as 17 well I think most people have gotten over that initial 18 fear of is this secure, is this protecting 19 confidentiality, et cetera, I think we all know the 20 securities are there now just as they are in banking and 21 et cetera in the legal work. 22 I think what Bob said and I think I think taking what Bob has said one step 23 further, the place the Commission ought to go is the 24 place to one system accessed by both attorneys 25 representing the company and the Commission, the staff For The Record, Inc. Waldorf, Maryland (301)870-8025 47 1 attorneys who have to have a way to access information 2 very quickly. 3 And what everyone is offering here is saving 4 time and saving money, and that's the thing that's also 5 been different from litigation. 6 There isn't as much posturing in the same way, 7 and the concept of having one centralized location for 8 documents can be accessed really within a matter of days 9 through a secure access, as much security passwords, 10 tokens with numbers could change every 30 seconds, 11 whatever you need to make your client comfortable. 12 That technology exists and can save time or 13 money for everyone involved and it is really current 14 what's happening in a lot of cases in the private sector 15 and what ought to be happening here as well. 16 MR. COOK: One thing that we found in doing this 17 Internet production was that it was an issue that we 18 anticipated that would arise in negotiating with staff, 19 and it did arise. 20 looking at so that what we did is we had a fire wall and 21 we had actually two servers that had the documents. 22 We didn't want you to know what we're We had our server that we were using for review, 23 and then once documents had been reviewed, we could 24 redact for privilege on the screen and things like 25 that. Then these would be transferred over to the For The Record, Inc. Waldorf, Maryland (301)870-8025 48 1 production server which had an entirely different staff 2 at the vendor level so that we didn't have any access to 3 it, and this was good and the way to do it, it didn't 4 actually add time because it probably took a day to take 5 the documents and move them from one server to another 6 because when you are redacting it and marking documents 7 as entirely privileged, you have to make sure you're not 8 putting it on the production server. 9 10 And that took some time but that's what we ended up having to do for a fire wall. 11 MR. COWIE: I take it the purpose of that is to 12 ensure the FTC can review and print without the parties 13 knowing. 14 15 16 MR. COOK: Exactly. That was the purpose of that. MR. JOHNSON: We've also had situations where 17 we've had submissions made on a number of CDs where 18 documents have been imaged and then OCR and then given 19 to us as part of our submission that way. 20 to know what you think the benefits are and 21 disadvantages are of the two types of approaches that -- 22 the one you just mentioned as well as providing us CDs 23 where we utilize submission or another software program 24 to read the data. 25 MR. COOK: I would like My only experience with the CD thing For The Record, Inc. Waldorf, Maryland (301)870-8025 49 1 you're talking about was when I was at the FTC when it 2 was unworkable because it just didn't work 3 technologically but this was ten years ago. 4 know at the -- it might work fine today. 5 there I think is that it requires equipment to work, and 6 the distinction between that and the Internet based is 7 that all you need is a browser. 8 I don't The problem We did provide -- on loan we provided some 9 monitors that provided more real estate because it does 10 require a large screen to do this effectively. 11 we provided ten 17 inch LED monitors. 12 were using in-house though were 21 inch huge TV screens 13 just because it had more capability. 14 15 MR. SCHILDKRAUT: I think I think what we I think, Dennis, you were describing my submission to you in Chevron Texaco. 16 MR. JOHNSON: Among others. 17 MR. SCHILDKRAUT: Which was all CD. The thing 18 that made that workable for us at the time, this was 19 last year, was the fact that we had to also provide 20 these materials to half a dozen states but otherwise it 21 would have been cheaper to produce -- it was only a 22 single production to the FTC. 23 cheaper to do it all by paper. 24 25 It still would have been We OCR'd it as well as providing the scanned version because both the agencies -- both the agency and For The Record, Inc. Waldorf, Maryland (301)870-8025 50 1 the States asked for the OCR as well as the scan, and we 2 provided the software, which was a cost to us, but the 3 cost was small compared to the cost of producing six 4 sets of a million documents, so that was the entire 5 reason we did it that way, and I have to say it's nice 6 however to walk through the FTC and see a clean hall 7 sometimes. 8 MS. MCDAVID: 9 hands on an important point. 10 production, even in hard copy, is already grossly 11 expensive, and what we're looking at is something in any 12 way significant will increase that cost. 13 think about that very hard, whether that to be something 14 that is an option for the parties to take on or an 15 obligation imposed by the second request. 16 I think these guys have put their A second request We need to We're talking millions of dollars for the 17 average second request already, and I don't know how 18 much more that costs, Marc, but if the break point was 19 you didn't otherwise have to copy six copies of a 20 million pages, that's a lot more money. 21 MR. COWIE: Jan, in assessing the cost, Dave 22 Scheffman made an interesting observation for me. 23 informal view is the real cost is not in collecting and 24 treating and reviewing of the paper. 25 time. For The Record, Inc. Waldorf, Maryland (301)870-8025 It's in that His 51 1 Real costs to the company is the time associated 2 with the compliance process, so in his view it would be 3 a significant difference between say a 300 box second 4 request that could be done in two or three months versus 5 300 box production that takes seven or eight months. 6 MS. MCDAVID: I don't think those are the right 7 kinds of break points. 8 would save us at although by doing this in this way. My 9 guess is that it doesn't save significantly at all. We 10 have to still undertake reviews of the documents and 11 that's where the time comes from. 12 MR. COOK: I'm not sure how much time it It does have problems, too, because 13 if you're doing an electronic production and you're 14 someone like me who wants to change things as you're 15 going like, Well, let's do these people first instead of 16 these people and changing -- it's very difficult to do 17 when you have this series of information technology 18 processes that have to be performed on the information 19 before you get to the FTC because once it gets in the 20 pipeline, you can't really move up. 21 You have to go through. It's easier to make 22 changes than to be free formed with papers once you 23 start to do these it's more -- it was more time 24 consuming to do things like that. 25 MR. SCHILDKRAUT: I think there are two For The Record, Inc. Waldorf, Maryland (301)870-8025 52 1 responses I have to David's point. First is electronic 2 production simply is no faster. 3 time in the production is the review of documents, and 4 that's what costs the majority of the money. 5 doesn't save any time to do this electronically at all. 6 Second point is I was just sort of thinking back The massive amount of Now, it 7 over my second requests over the last half a dozen 8 years, and by and large, it was not the document 9 production that resulted in the time delays at the end 10 of the day. 11 the staff still wanted to either investigate for six 12 months or I had to negotiate consent orders for six 13 months. 14 I would finish the document production, and I mean, it was all those kinds of things that 15 ended up creating the delays in the process, and if 16 you're dealing with one of these very large mergers, 17 it's a minimum amount of time that staff needs to go out 18 and interview people, do depositions and things like 19 that, and it's not really the document review that's 20 forcing this thing to take a year rather than three 21 months. 22 MR. BROWN: I think I would be interested in 23 hearing from other folks who may have experience with 24 this about their feelings about the cost and the effect 25 in doing this electronically. I don't know that we are For The Record, Inc. Waldorf, Maryland (301)870-8025 53 1 equally applying technology in our particular cases, and 2 I'm certainly willing to say I'm in need of more 3 education myself because we're always looking to see 4 what's out there. 5 Technology is changing, so I think it's 6 important to have other people speak up who may have had 7 different experience and different opinions on this. 8 Rich? 9 MR. KORBIN: I just wanted to say that I may be 10 the only one in the room that thinks this, but we've 11 done quite a few of these cases, and I haven't see any 12 instances where doing it electronically hasn't been the 13 quickest and cheapest way to do this. 14 done 15 million pages of printed documents and someone 15 said, Review these documents and produce them to the FTC 16 in 30 days, they would be pretty hard pressed to get 17 that done in a law firm today and we've done that. I think if I have 18 We do quite a few of these cases, and we've seen 19 that the hard problem of what does it cost to print, in 20 New York City it's 15 cents, and our technology is 21 around the same price. 22 electronically, I agree the review process make take 23 longer, but if you're reviewing paper documents, what's 24 going to take longer, reviewing every single paper of 25 the paper or doing a search term in a system? When you're doing For The Record, Inc. Waldorf, Maryland (301)870-8025 54 1 It's hard to say that that isn't a faster way of 2 doing it when I could run five search terms and have the 3 two million documents that respond to that instantly. 4 There are other costs I know associated with that, but 5 we have seen productions through our system that have 6 never been done on paper, so that's why we can see in 7 the end that it was cheaper. 8 We've had people tell us "our very first second 9 request that we did the client told us they saved $2 10 million on that request. 11 after the fact. 12 seen that across the board. 13 year. 14 productions. They gave us those numbers We thought it was substantial. We've We've been doing it one Paper productions are faster than electronic 15 I know everybody has their own opinion on that 16 but we're seeing some pretty hard facts in our company. 17 MS. MCDAVID: I think we have to distinguish 18 between documents that exist in native format in 19 companies files, in hard copy that are required for 20 production native format in the company electronics. 21 Those I suspect might be much faster to produce in 22 electronic form, but if you have got 500 boxes of hard 23 copy and to make them electronic one has to push them 24 through a machine and photograph them, then we're just 25 talking about a different version of the same For The Record, Inc. Waldorf, Maryland (301)870-8025 55 1 production. 2 And those documents will not be searchable in 3 that format unless they're scanned simultaneously in a 4 way that's probably not reliable for search, so I think 5 you have to distinguish between the time and the cost 6 involved as to what the nature of the for was. 7 MR. KORBIN: I agree with that. I was talking 8 about documents, originated form. Paper documents are 9 always going to be paper documents we've seen that 10 decreased over time as far as how many paper documents 11 are produced, but I can agree that it's a better way to 12 doing it versus paper production, but purely electronic 13 data starts electronic that takes into the system 14 directly electronically. 15 as opposed to printing. 16 MR. SCHILDKRAUT: That to us is no doubt faster Not substantially because the 17 vast majority of the time is reviewing it unless the 18 agency is going to allow something like search terms. 19 Most of the time in the process it is not the production 20 of the pieces of paper. 21 paper, hiring -- sometimes I've had to hire up to 400 22 temporary attorneys to review these documents. 23 It's reviewing those pieces of In one merger I had -- we essentially had to 24 create a site with massive warehouses with 20 25 port-a-johns with 300 attorneys at a single site with For The Record, Inc. Waldorf, Maryland (301)870-8025 56 1 golf carts that moved people back and forth across the 2 site with trucks on a particular schedule moving 3 everything around. 4 the review. 5 That's what takes all the time is MS. MCDAVID: The human -- someone has to review 6 each piece of paper and determine whether it is or isn't 7 responsive. 8 avoided unless we can go back to search terms. 9 That's the part of this that cannot be MR. HOFFMAN: But it seems to me even with 10 search terms you're not going to be able to eliminate 11 that problem. 12 which that kind of review has to be applied. 13 experience with scanning productions is that they take a 14 little longer and cost a little more on the front end 15 actually than producing things in paper. You just reduce the scope of terms to My 16 You get savings to some extent at the back end, 17 depending on how many times you're going to use them and 18 how much you're actually going to use them. 19 second request context, it might be never again. 20 might never want to look at them. 21 After the You The other thing you might be doing multiple 22 productions to different regulators, things like that, 23 that's where those things seem to be pretty cost 24 effective from a parties' standpoint leaving aside 25 accessible to the regulator. For The Record, Inc. Waldorf, Maryland (301)870-8025 57 1 2 3 Anybody else have any thoughts on any of these issues so far? MR. COWIE: Let me supplement that. Feel free 4 to address issues that are only loosely related to 5 electronic discovery but nonetheless related more 6 generally to second request process. 7 MR. SCHILDKRAUT: I have two proposals that I 8 think you ought to think about, and this relates to 9 electronic discovery and all other forms of discovery. 10 One is is I have found over the last half a dozen years 11 or so that we really haven't advanced the ball much in 12 terms of cutting back on second requests, and I think 13 that there needs to be more of a shared experience, and 14 I think the way the agency can do that is by doing 15 retrospectives in second requests. 16 And I think the way you go about doing that is 17 figure out as you went through the process what I cut 18 back, what you didn't cut back, and then what you 19 actually use and try to come up with a methodology that 20 you can apply second request after second request to 21 identify areas where you're requesting information and 22 then don't use it. 23 I don't know whether that will work or not maybe 24 every second request is actually sui generis, but it is 25 possible that you may find that there are ways of For The Record, Inc. Waldorf, Maryland (301)870-8025 58 1 cutting back that are not going to be particularly 2 harmful to you because at the end of the day if you're 3 -- you know, if you request that you get a thousand 4 boxes of documents, you're still only going to use 5 probably a thousand documents total that are going to be 6 useful to you in the investigation, so you've obviously 7 requested a lot more than you need, and there may be 8 better ways of doing it, so that's one idea that I think 9 people ought to think about. 10 A second idea that I think people ought to think 11 about though I'm not sure it will work is making the 12 appeal process more transparent. 13 to encourage people to use the appeal process and then 14 to publish the decisions on the appeal process. 15 What I mean by that is I can think of very few cases where I actually 16 would have used the appeal process, but there is one 17 where I would have used it and it was actually something 18 that actually led to there being an appeal process. 19 there may have be a few occasions where people would use 20 it. 21 So I think you should take the decisions that have 22 already been made and ask them, put them on up on the 23 Internet site. 24 now, but over time I think you'll see more of those, and 25 that will sort of spread the knowledge around where I know there are only a couple of them For The Record, Inc. Waldorf, Maryland (301)870-8025 59 1 cutbacks are acceptable, things that we can do. 2 MS. MCDAVID: An issue that is not even remotely 3 related to electronic production is the issue of 4 transcript of depositions, and it's a particular painful 5 point for the private bar, is extraordinarily 6 inefficient and costly for the parties and their counsel 7 to have to have associates sit in the room and take 8 detailed notes of a deposition. 9 It means that we are less effective in dealing 10 with you on the merits if when we prepare papers for 11 you, we are not able to cite to a page and a line of a 12 deposition, but simply paraphrase something that a 13 deponent may have said. 14 The only basis that has ever been articulated in 15 the Commission's rule which is quite notably different 16 than that applied by the antitrust division with 17 concurrent jurisdiction in exactly the same kind of 18 investigations, essentially assumes obstruction of 19 justice on the part of companies and their counsel. 20 Federal Courts have managed to lumber along 21 since the 1940s when Judge Clark first drafted the 22 Federal Rules of Civil Procedure by allowing parties to 23 have copies of transcripts in litigation. 24 25 The antitrust division "most other agencies do so. I would urge you in the strongest possible terms to For The Record, Inc. Waldorf, Maryland (301)870-8025 60 1 revisit this question because it's inefficient, costly 2 and obvious issue. 3 MR. GLEKLEN: John Gleklen from Arnold & 4 Porter. At the risk of being the one who points this 5 out, I think the reality of a lot of the things that we 6 have discussed today is the Commission's fear that 7 parties are going to screw them at the end of day on 8 time and where a party comes to you up front and says, 9 We're not going to jam you up on time, we will give you 10 60 days or whatever you need in order to do your 11 investigation or a rolling 60 days or whatever, that 12 that is the time to be reasonable about searching 13 back-up tapes, about scope of search. 14 I have done thousand box productions and 15 received 950 of them back with the tape uncut, and that 16 is not because there's nothing interesting in there. 17 was because the search list got extended because you 18 were afraid that you wouldn't have enough time. 19 the parties are willing to give you enough time and will 20 commit to that, why create money for the photocopying 21 vendors or the document imaging vendors and the contract 22 lawyers? 23 It Where Why not let's focus on what's important? You'll have the time you need and instead of 24 just us all producing documents that we know will never 25 get read or back-up tapes that we know will never be For The Record, Inc. Waldorf, Maryland (301)870-8025 61 1 printed and read, that's my suggestion to you. 2 3 MR. COWIE: What is it that you think we're focusing on that is not important? 4 MR. GLEKLEN: This is my experience. In my 5 experience there has never been a legitimate need to 6 look at back-up tapes in the second request. 7 of search in terms of the number of people that need to 8 be searched, if the idea of a Hart-Scott second request 9 investigation is to figure out which products compete 10 which products constrain the price are one another, 11 unless there are 50 different products, it's just hard 12 to imagine how you need to search more than a couple 13 dozen people, and that is the exception rather than the 14 rule. 15 MR. LOWE: The scope Mike, the other thing I would 16 strongly suggest is this is my best practices, that the 17 two agencies talk to another about these productions, 18 there's a divergence of products between the two 19 agencies, a modification of second request. 20 There's a divergence of practice on how issues 21 of compliance are handled on the back end, and the two 22 agencies need to get together and talk to one another 23 more than they clearly do or at least they need to agree 24 more than they clearly do on practices and responding to 25 the second request. For The Record, Inc. Waldorf, Maryland (301)870-8025 62 1 Other than the discussion among us this morning, 2 there was an agreement that there is a distinction 3 between the agencies and a number of these questions, 4 one of which is certainty of modifications upfront where 5 the division seems to be more willing to agree to 6 modifications and stick with them rather than to simply 7 defer things or also make decisions quicker that allows 8 more certainty and frankly results in them probably 9 receiving less paper because if we can't be certain that 10 a modification will be accepted, we're going to produce 11 rather than wait. 12 13 And there is a distinction and the two agencies really need to talk to each other about these issues. 14 MS. MCDAVID: The division has recently adopted 15 a method of operating in which the parties and the 16 agency can agree with the schedule up front in which 17 specific dates are assigned to specific kinds of 18 events. 19 Dennis and I had a matter in which that kind of 20 schedule was used with some success and some lack of 21 success on the back end. 22 deadline at which point it fell apart. 23 us doing things that we agreed to do by a certain date, 24 that worked. 25 It worked up until the But in terms of The agency agreed to do certain things in terms For The Record, Inc. Waldorf, Maryland (301)870-8025 63 1 of telling us their issues of concern by a certain day. 2 That certainly it would be worth exploring with the 3 division the experience they've had since Charles 4 announced those modifications to their processes last 5 October. 6 MR. COOK: The one biggest difference between 7 the way the second request looked is the indexing 8 requirement where the FTC requirement is specification 9 by specification indexing, and I'm not sure how usable 10 that is. 11 I'm sure it's somewhat -- I know it's somewhat 12 useful, but I also know that the Federal Rules require 13 them to be produced as kept in the ordinary course of 14 business, and it is burden some to create that. 15 If you're going through, the one skill set for 16 people who are doing documents might be to spot one 17 that's privileged. 18 person who is good at figuring out if it's an 18 A or a 19 7 B. That's not necessarily the same 20 That's just -- that is more difficult to do it 21 and it does add time and it makes it more difficult to 22 produce them within 14 days or 30 days. 23 24 25 MR. COWIE: That's another difference between FTC and Justice Department practice. MR. COOK: Yes. Models of the two agencies For The Record, Inc. Waldorf, Maryland (301)870-8025 64 1 differ on that one point. 2 matter of production. 3 MR. GLEKLEN: The indexing requirement and John Gleklen again. In relation 4 to the normal course of business this is not something 5 I've had personal experience with, but I know other 6 attorneys in my firm have, and they asked me to raise 7 this, and that is the requirement that the parties 8 produce electronic information in the form in which it 9 is not normally kept by the parties. 10 In one case, in a supermarket merger they, were 11 actually told, We're not going to deem you to be in 12 substantial compliance unless you go out and buy this 13 data for us. 14 Parties should only have to produce data that the 15 parties actually have. 16 available from some third-party market research firm, 17 the Commission should go buy it. 18 That seems to me to be outrageous. MR. COWIE: If the Commission wants data All right. Does anyone else have 19 any comments or criticism, constructive or otherwise? 20 No? 21 MR. HOFFMAN: 22 MR. COWIE: Don't be shy. Criticize Michael. This was very helpful. As I 23 mentioned earlier there are other sessions as announced 24 on our web site. 25 We're expecting papers from some large association We also encourage written comments. For The Record, Inc. Waldorf, Maryland (301)870-8025 65 1 groups, and we would like to state anything in writing 2 that is welcome. 3 4 Thank you. (Time noted: 3:25 p.m.) - - - - - 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 66 1 C E R T I F I C A T I O N O F R E P O R T E R 2 3 CASE TITLE: WORKSHOP ON ELECTRONIC RECORDS 4 WORKSHOP DATE: JUNE 3, 2002 5 6 I HEREBY CERTIFY that the transcript contained 7 herein is a full and accurate transcript of the notes 8 taken by me at the hearing on the above cause before the 9 FEDERAL TRADE COMMISSION to the best of my knowledge and 10 belief. 11 12 DATED: JUNE 5, 2002 13 14 15 16 DEBRA L. MAHEUX C E R T I F I C A T I O N O F P R O O F R E A D E R 17 18 I HEREBY CERTIFY that I proofread the transcript 19 for accuracy in spelling, hyphenation, punctuation and 20 format. 21 22 DIANE QUADE 23 24 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A36b25c6dd4b1e3f6. Public record. Not legal advice.