# UNITED STATES FEDERAL TRADE COMMISSION > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A3722f3a2bb58dbb1 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text 1 1 UNITED STATES FEDERAL TRADE COMMISSION 2 MERGER BEST PRACTICES WORKSHOP 3 June 25, 2002 4 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 2 1 APPEARANCES 2 3 Kenneth H. Abbe, Esq. 4 John D. Jacobs, Esq. 5 Federal Trade Commission 6 Western Region - Los Angeles 7 10877 Wilshire Blvd. 8 Suite 700 9 Los Angeles, CA 90024 10 11 John P. Wiegand, Esq. 12 Norris E. Washington, Esq. 13 Federal Trade Commission 14 Suite 570 15 901 Market Street 16 San Francisco, CA 94103 17 18 Bruce Hoffman, Esq. 19 Peter Richman, Esq. 20 Federal Trade Commission 21 600 Pennsylvania Ave., NW 22 Washington, DC 20580 23 24 Geoff Allred 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 3 1 APPEARANCES (Continued) 2 3 Adam Bendell, SV Technology 4 5 Winston Chen 6 7 Pamela Cole 8 U.S. Department of Justice 9 San Francisco, CA 10 11 Monica Fernandez 12 13 Suzanne B. Drennon 14 Don T. Hibler, Jr. 15 Sheppard, Mullin, Richter & Hampton LLP 16 Forty-Eighth Floor 17 333 South Hope Street 18 Los Angeles, CA 90071-1448 19 20 Virginia Llewellyn 21 22 Jeff Mitchell 23 24 Ron Redcay, Esq. 25 Arnold & Porter For The Record, Inc. Waldorf, Maryland (301)870-8025 4 1 APPEARANCES (Continued) 2 3 Cristina Rodriguez-Rios 4 Sheppard, Mullin, Richter & Hampton LLP 5 800 Anacapa Street 6 Santa Barbara, CA 93101 7 8 Minda R. Schechter, Esq. 9 Hogan & Hartson, LLP 10 Biltmore Tower 11 500 South Grand Avenue, Suite 1900 12 Los Angeles, CA 90071 13 14 Scott A. Sher, Esq. 15 Wilson, Sonsini, Goodrich & Rosati 16 650 Page Mill Road 17 Palo Alto, CA 94304-1050 18 19 Martin J. Thompson, Esq. 20 Manatt, Phelps & Phillips, LLP 21 650 Town Center Drive, Suite 1250 22 Costa Mesa, CA 92626 23 24 Henry C. Thumann, Esq. 25 O'Melveny & Myers For The Record, Inc. Waldorf, Maryland (301)870-8025 5 1 APPEARANCES (Continued) 2 3 Kathleen J. Tuttle, Esq. 4 LAC D.A. 5 6 Emilio Varanini 7 8 Dave Wilner 9 10 Raffi Zerdounian 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 6 1 2 P R O C E E D I N G S June 25, 2002 12:00 P.M. MR. WIEGAND: 3 Good afternoon. On behalf of the 4 Western Region of the Federal Trade Commission and Jeffrey 5 Klerfeld, the Regional Director, I would like to welcome you to 6 the Merger Best Practices Workshop for Los Angeles. As you can see, the proceedings here today are being 7 8 transcribed and it is very important, therefore, for us to 9 identify ourselves when we speak and not talk over one another. 10 That is on one hand. 11 a town meeting sort of style, so we do want to encourage 12 interaction and folks to agree or disagree with one another and 13 just feel free to jump in. 14 On the other hand, we want to proceed in What we have done is identify several subtopics and 15 we have designated an individual to initiate the discussion on 16 those subjects. 17 from there into people's responses to it. They will do that and then we will just go MR. WIEGAND: 18 Our first subject this afternoon is the 19 use of the initial waiting period, how the government uses it, 20 and how parties to the mergers could get in trouble by jumping 21 the gun. 22 initiate the discussion on this subject and we would just like 23 to hear what other people have to say. 24 25 Henry Thumann from O'Melveny & Myers is going to MR. THUMANN: Would I be redundant if I say I'm Henry Thumann now? For The Record, Inc. Waldorf, Maryland (301)870-8025 7 1 THE REPORTER: No. 2 MR. THUMANN: Well, John, Gun-Jumping is one of those 3 classic areas where there is virtually no case law and what 4 little the buyer knows about it comes from agency speeches and 5 consent decrees. 6 diametrically contrary with the agency's position, so in 7 thinking of International Travel Associates and the Eighth 8 Circuit, which held that collaboration between two merger 9 partners is subject to -- (inaudible). 10 And what little case law there is is It does leave the practitioner, I think, with a 11 couple of theoretical questions. For example, how is it that 12 the Commission and the DOJ are able to apply Section 7A and 13 post signs on pre-closing collaboration on the acquired company 14 when the statute only visits the obtaining or the taking of 15 beneficial control and not the "giving up," so to speak of 16 beneficial control. 17 is the notion that Section 7A has three Congressional purposes, 18 namely (1) to maintain competition between the putative merger 19 partners while the review process is pending, when the 20 Legislative history only identifies two purposes, one which is 21 to permit a review, and the second which is to provide a basis 22 for meaningful relief if there is a successful challenge. 23 Those are really theoretical and probably not a lot of 24 practical consequence that, the International Travel Associates 25 aside, Section 1, I think, is fairly broadly seen as applying Equally, I guess, theoretically puzzling For The Record, Inc. Waldorf, Maryland (301)870-8025 8 1 to collaboration between the merger partners. So a theoretical 2 question is simply how does Section 7A get added to the consent 3 decrees which is done universally as a joint charge of the 4 Section 1 violation and the Section 7A violation in all of the 5 consent decrees -- I think. More practical is what can the parties do and what 6 7 can they not do, whether it be Section 1 or Section 7A. 8 seems to be broad agreement that when -- (inaudible) -- 9 concluding from the speeches and the consent decrees that (1) 10 collaboration between the putative merger partners if an 11 information exchange -- unless they are fixing prices or 12 something -- but if they are simply exchanging information via 13 due diligence, via merger, integration planning, that it is a 14 rule of reason analysis and not a per se violation. 15 there seems to be consensus that due diligence is appropriate 16 and reasonable and efficient and pro-competitive in that, 17 without due diligence, it is hard for parties to come together 18 and reach a merger agreement and the consolidation of mergers 19 in the broad economic sphere is pro-competitive where there 20 aren't any anti-competitive constraints created or power 21 created. 22 There Second, The area that I think is really ambiguous is what 23 about collaboration with respect to post-merger integration? 24 It is increasingly essential, or so I think business persons 25 will tell you, to start that process prior to the final closing For The Record, Inc. Waldorf, Maryland (301)870-8025 9 1 of the agreement. 2 the areas such as technology, if you hold off all integration 3 efforts, all integration planning, employee consolidation has 4 actually occurred, the chances to effectively and efficiently 5 accomplish the integration are themselves impaired and 6 compromised. 7 decrees from both agencies that I am aware of that address the 8 issue. 9 And this is a rapidly changing world, and So what we have are, I think, essentially consent And we have a couple of speeches which really give 10 enormous guidance. 11 1994 in which she said, "Planning the efficient integration of 12 the firms after a consummation is appropriate." 13 1998 speech by Bill Baer in which he says, "While parties have 14 argued that their intent was really to plan integration rather 15 than to implement it, we do not think this distinction meets 16 the requirements of the Act." 17 We have a speech by Mary Lou Steptoe in And we have a So I guess my question is, what guidance have I 18 missed or can you provide with respect to the appropriateness 19 of integration planning while the review process is underway, 20 where there is no implementation, or there is adequate, there 21 is sufficient confidentiality maintenance with respect to 22 having a group that is a planning group act to exchange the 23 information and not have it passed on to the people who are 24 currently operating and in competitive process between two 25 companies? Who is right? Bill or Mary Lou? For The Record, Inc. Waldorf, Maryland (301)870-8025 10 MR. HOFFMAN: 1 Let me answer that two ways. 2 Obviously, I don't think we are going to be able to answer a 3 lot of questions here and, you know, as John indicated, that 4 really isn't the purpose of this. 5 listen to questions and thoughts like that, and to take them 6 back and try to assimilate them and come out with some sort of 7 response. 8 Most of our purpose is to With that in mind, I would like to say two things: 9 first is, what kind of guideline would you like from us? 10 mean, in this issue, are you talking about as to published 11 guidelines like the Guidelines on Intellectual Property, or the 12 Health Care Guidelines, or something else? 13 open up to anybody else to comment on the question of Gun- 14 Jumping and pre-approval integration, and what kind of 15 experiences everyone has had with that and what kind of 16 thoughts they have on what we could do to maybe alleviate what 17 certainly seems to be a pretty high and pretty well- based 18 level of confusion out there about what the agencies will go 19 after and what they won't. 20 MR. REDCAY: This is Ron Redcay. I Second, I'd like to I think the answer 21 is we know what guidelines likely you are referring to, but I 22 do think that filling in the space between the speeches -- the 23 two lines in the speeches that Henry referred to -- would be 24 helpful. 25 be okay; the question is, when the planning goes beyond mere Specifically, it seems to be that planning has got to For The Record, Inc. Waldorf, Maryland (301)870-8025 11 1 planning and gets into pay announcements and reorganizations, I 2 mean, I think having gone through a fairly large merger which 3 took a long long time from the time it was announced until the 4 time it closed, it certainly was a major concern in all the 5 various businesses what you could do and what you couldn't do. 6 And there were very few guideposts out there. And so 7 I think someone would like something more definitive than you 8 have, but not all the way to formal guidelines. 9 MR. SHER: This is Scott Sher. I think it would be 10 helpful to have more decisional law or more public speeches 11 about the topic. 12 you can't stall Vice Presidents in target companies to control 13 prices and, you know, deviations from distributor agreements. 14 But we don't really know whether or not, and this is 15 especially pertinent in the high tech industry, we don't know 16 whether or not it's okay to have joint customer calls to assure 17 customers that the target company, that their product lines, 18 likely will survive in some form post merger. 19 have an investigation that is going to last three months, four 20 months, five months, or six months, and you have a small target 21 company whose product life cycle is short, you know, that type 22 of uncertainty surrounding that company's products is deadly. 23 That company's products are likely dead in the water I mean, we know from Computer Associates that And when you 24 and the technology can end up being squandered. 25 of the ambiguous areas that we really don't have any guidance For The Record, Inc. Waldorf, Maryland (301)870-8025 So it's more 12 1 on. There was a brown bag, I think, two months ago and I don't 2 remember who had made the comment, but someone had made the 3 comment that the merger agreement itself could serve as the 4 basis of an agreement for a conspiracy. Comments like that are scary and it makes it really 5 6 difficult counseling the client on what's appropriate in merger 7 integration planning prior to the time of consummation. 8 MR. HIBLER: Don Hibler here. I would look back a 9 few years ago and remember a case called The United States vs. 10 Aqua Media in the 9th Circuit where the proposition that it was 11 appropriate relief to hold in both the acquiring and the 12 acquired company, and I would imagine people would find that to 13 be of some authoritative value. 14 ago. 15 That goes back quite a while But I would say that the two things that have been 16 most helpful to me are not necessarily the agency speeches, but 17 I think an article by Will Tom on this very topic. 18 recent collaboration guidelines, which I think, taken together, 19 will allow me to go through the appropriate qualitative 20 analysis that would solve most of my problems. 21 know how much better would I feel at the end of the day if I 22 had the Bureau of Competition -- these are hypotheticals. 23 think maybe on another scope, but not myself. 24 25 MR. HOFFMAN: And the And I don't I Well, assume there is not a big push out there for us to generate some additional decisional law on For The Record, Inc. Waldorf, Maryland (301)870-8025 13 1 this. 2 3 4 MR. HIBLER: Right. Have you seen the Aqua Media MR. HOFFMAN: I haven't thought at all about this decision? 5 topic prior to coming in here, so I don't really know what -- I 6 know we actually internally are looking at Gun-Jumping in 7 general and there's sort of an overall internal review about 8 what level of planning and actual integration is going to be 9 problematic and what we do about that, but I haven't got a lot 10 of additional thoughts of my own about that. 11 have any thoughts on that? 12 MR. RICHMAN: Peter, do you Peter Richman, from the FTC. We have a 13 couple of deals in the last, oh, post-dating Bill Baer's 14 speech, in which the Day 1 planning went forward at what might 15 have been troubling on its face, but was done very, very well 16 to prevent the flow of information, which is a primary concern. 17 If we are going to have a problem with the entire deal, we 18 don't want any competitive information transferring. 19 going to have a problem with part of the deal, we don't want to 20 have that information transferred because those employees are 21 going back. 22 If we are And firewalls, while implemented well during the 23 pendency of the merger investigation, don't prevent the 24 transfer of information later, and especially if it is 25 competitive pricing and output information. For The Record, Inc. Waldorf, Maryland (301)870-8025 The Dan Ducore 14 1 shop is studying what those law firms did very well and it's 2 hard, Scott, I don't want to give kudos to any of your 3 competitors anyway, but they're studying what went well and 4 trying to figure out how to provide that sort of guidance. 5 If hypotheticals aren't that helpful, that is 6 something that we ought to be thinking about. 7 something that would give more definition to the question 8 because, you know, in the industries I deal with, which are 9 rust belt industries, there is no new technology that is going 10 to be lost in six months during the pendency of a merger review 11 as in software, or new drug development, or whatever it is that 12 might be a shorter time frame where investors are running away 13 from something while we are investigating. 14 You may need more information. And if there is But I know that the 15 Compliance Division is spending a lot of time and resources on 16 this question. 17 MR. THOMPSON: There is one other possible resource 18 and I don't want to get anybody in trouble -- this is Marty 19 Thompson -- the Pre-Merger Notification Office has actually 20 given me help sometimes on specific questions: 21 while it's pending, will you call that Gun-Jumping?" 22 have been able or willing to deal with very specific instances. 23 Yeah, speeches tend to be the path of least resistance as far 24 as getting information out there you can point to. 25 "If we do this And they One area where I think there has become a dearth of For The Record, Inc. Waldorf, Maryland (301)870-8025 15 1 speeches to point to is on the question of what the recommended 2 or acceptable processes are for sharing extremely confidential 3 information. 4 conservative bunch, and yet still, when I tell them that 5 certain things and certain phases may be a little too sensitive 6 to share directly, maybe you better get a consultant to launder 7 it for you, give you a composite of information, there is a 8 certain hesitancy to spend the money. 9 And I know my clients on the whole tend to be a If there was a speech that said here are some 10 recommended approaches that are likely to be acceptable, it 11 would certainly give me more credibility in telling them I need 12 to spend some extra money. 13 MR. HOFFMAN: You know, we have heard a little bit 14 about the consultant idea and I would certainly be interested, 15 you know, at some point probably we should turn to talking 16 about the Second Request. 17 indefinitely, but we would like, also, if anybody wants to 18 submit written comments or anything like that to us, this is an 19 area I would be interested in hearing some more about is what 20 people think about the practical utility of conducting your 21 merger through consultants while the agencies are performing 22 their review. 23 I don't mean to drag this topic out I have some pretty mixed things -- pros and cons 24 about the problems that are involved in doing that. 25 mean to limit submitting information to that topic by any For The Record, Inc. Waldorf, Maryland (301)870-8025 I don't 16 1 stretch of the imagination. Send us anything or any comments 2 on anything you think we can do better. 3 Anything else on Initial Waiting Period? 4 MR. REDCAY: I guess I wanted -- this is Ron Redcay - 5 - in response to Peter's comment. One of the questions I think 6 I have got is, all the discussion we had recently seems to talk 7 about this topic in the context of extreme confidential 8 information. 9 us is to see what are the other objectives or reasons why 10 you're concerned about Gun-Jumping, because I think it is 11 broader than that. And I guess I wanted to clarify things that for 12 Those are some of the questions that get more 13 complicated -- things like maintaining the vitality of 14 businesses, preserving the ability to have effective merger 15 remedies. 16 competitive information that I think we may need more guidance 17 because I do think people do a pretty good job through 18 consultants and firewalls and preventing information from going 19 back and forth, but it's these other areas that I think are a 20 little more touchy-feely and need some clarification. 21 It is in that area rather than the exchange of MR. RICHMAN: We have had one Remedy workshop. 22 Others may or may not be in the works, but these issues are 23 specifically addressed, along with the over-arching what are we 24 doing with remedies and buyers in front? 25 is in charge of those. For The Record, Inc. Waldorf, Maryland (301)870-8025 And again, Dan Ducore 17 MR. WIEGAND: 1 Did anyone have any comments about what 2 the government -- what our agency should be doing during the 3 Initial Waiting Period, whether we are using the time 4 effectively, or whether we are missing opportunities? MR. SHER: 5 I think it varies from staff to staff. I 6 think some review staff uses the 30-day waiting period very 7 effectively. 8 letters and don't really push beyond that. 9 it's in part because of the failing of the clearance agreement, 10 it takes too long to get a request for information out and it's 11 already beginning to bump up on the end of the 30-day waiting 12 period by the time an initial 30-day voluntary request letter 13 comes in. 14 Some issue fairly boilerplate voluntary request Or, because, maybe So I think it really varies from staff to staff. We have seen over the past year some really good 15 improvements on the type of information that is asked and the 16 responsiveness of staff. 17 about their concerns, where they're coming from, and what we 18 need to do to address them to make sure that we can either 19 limit the scope of the Second Request or get out of one 20 altogether. 21 MR. HOFFMAN: People have been very upfront with us Anything specific in mind that we ought 22 to be thinking of in terms of practices that we could implement 23 across the agency to use that period to its best effect? 24 25 MR. SHER: Scott Sher again. I think personally from my view point, it would be very helpful to actually set forth For The Record, Inc. Waldorf, Maryland (301)870-8025 18 1 information that, depending upon the industry, that you would 2 find most helpful to review the industry because, for some 3 industries, some of the initial 30-day Waiting Period 4 information that you guys ask for is very broad, very general, 5 and doesn't really have to do with the transaction. 6 request for, you know, all business plans for the company, it's 7 very, very broad and the information is probably very broad. 8 MR. THOMPSON: A general Generally in my experience -- this is 9 Marty Thompson again -- the Staff have been quite willing to 10 actually meet physically during the 30 days. 11 can vary from staff to staff. 12 that refused to meet until the Second Request was issued. 13 never quite understood that. 14 use it pretty effectively and have major sessions and dog and 15 pony shows before the 30 days was up. 16 17 MR. HOFFMAN: As Scott said, it We have actually had one staff I But usually we've been able to Was there a clearance issue in the one case where somebody wouldn't meet with you? 18 MR. THOMPSON: 19 to a particular office. 20 to do anything to compromise the surprise value of the Second 21 Request because there was a certain amount of adversity already 22 built into that particular situation. 23 MR. HOFFMAN: Oh, no. It had already been assigned I got the impression they didn't want That's unfortunate. I think in the 24 interest of time, probably we should -- I mean, again, any more 25 thoughts that folks have on these issues, we'd love to hear For The Record, Inc. Waldorf, Maryland (301)870-8025 19 1 them and you can submit them to us. I think there will be 2 guidelines on the website about sending them that way, or you 3 can contact any of us and we'll figure out how to do it. 4 can't recall off-hand what the mechanism is. 5 to the Second Request, speaking of the surprise value of the 6 Second Request. I Let me turn now 7 MR. THOMPSON: And that was not typical. 8 MR. HOFFMAN: Let me maybe turn to that topic in 9 general. 10 different aspects of or introduce the topics of content and 11 scope and negotiating modifications. 12 We have Marty and Ron who are going to talk about I thought it might make the most sense if we just 13 dealt with the Second Request, you know, in its entirety in one 14 piece ranging from is the model working, are there things we 15 should do with the model to fix it? Or are there different 16 variants to the model we should use? What are people's 17 thoughts on how the Second Request asks you to sort and 18 organize information? 19 we could do better in that regard, or what private parties 20 could do to help us out. 21 issue. 22 Timing Agreements, how those work, what Translation, I know, has been a big And our internal appellate procedure for resolving 23 modification disputes, in which we have this appeal set up to 24 the General Counsel's Office which I think is an interesting 25 and useful procedure, but it has been under-utilized. For The Record, Inc. Waldorf, Maryland (301)870-8025 So I'm 20 1 interested in folks' thoughts on those issues or really 2 anything else having to do with what the second request looks 3 like and how you get it changed during the course of an 4 investigation. 5 then Ron. So, now let me just turn it over to Marty and And then everybody. MR. THOMPSON: 6 The Second Request has actually 7 generated even less case law than Gun-Jumping. I think that's 8 a reflection of the fact that, even though theoretically you 9 have recourse to District Court if things are bad enough, as a 10 practical matter, if you get to that point, it's too late. 11 It's inherently an informal process. 12 before to kind of think of what you folks might do better. And John had asked me And if you would allow me to say that, as of three 13 14 years ago, there was a lot to say. 15 reform, I think at least on paper, you folks have pretty well 16 picked all the low hanging fruit. 17 process. 18 amounts to a mediator in place. 19 meeting. 20 The problem is with the I mean, it is an informal You've got a situation now where there is what Immediately, there is an early My own observation is there does seem to be a less 21 adversarial relationship in the process than there used to be. 22 And maybe that's just by accident and certainly there are not 23 enough examples in my experience to call it a valid sample, but 24 it does seem to be the case. 25 there are people that have noticed that the new statute I don't know, of the staff, if For The Record, Inc. Waldorf, Maryland (301)870-8025 21 1 actually has an amazing amount of detail even getting into the 2 Second Request and what is expected of the agencies, and maybe 3 that is a reflection of some of the consternation earlier. 4 Just looking at what changed with reform and the 5 changes in the rules, I thought one of the interesting things 6 that didn't change -- one of the oddities has always seemed to 7 me about the Second Request -- was the rule that requires the 8 poor administrative assistant that gives you telephonic notice 9 to also offer to read the thing to you on the phone. 10 Now, you know, this day of e-mails and faxes, I've 11 always said no because there's just -- it's not fun to make an 12 administrative assistant read a 40-page document to you on 13 Friday afternoon. 14 think, to streamline the process, I've always thought that if 15 the person who had to offer to read it on the phone was the 16 lawyer who drafted it you would see much shorter Second 17 Requests! But when you're looking at opportunities, I 18 MR. HOFFMAN: I think Peter should definitely have 19 something to say about that one. 20 MR. RICHMAN: I just edit, I don't draft. 21 MR. THOMPSON: The other area where I find that there 22 might still be a real opportunity for major savings is one in 23 which I know you don't have complete control. 24 went through an experience last year where -- and it's pretty 25 common these days -- you're getting a Second Request that the For The Record, Inc. Waldorf, Maryland (301)870-8025 And John and I 22 1 FTC or DOJ is investigating a merger, and more or less 2 concurrently you're getting a CID from a State AG. 3 investigating the same merger under state law which is probably 4 just about identical. 5 different state that John and I did recently. 6 And they're This wasn't in California, this was in a Now, in that instance, I know that John went to great 7 lengths to minimize the differences between the approaches of 8 the two agencies, and yet it was impossible to eliminate the 9 differences. 10 same day and one says, "Go back three years," and one says, "Go 11 back five years," and one says, 12 "You've got a 100-mile radius," and one says, "You've got a 13 200-mile radius," and one says, "Here's the format for your 14 electronic data," and one says, "Here's a different format for 15 the electronic data," it's inherently sort of cumbersome. 16 And the clients, I think, tend to lose a little When you go through documents more or less the 17 respect for the process when they say, "Why couldn't you guys 18 work it out?" 19 the substance, which we eventually did, the numbering was 20 different. 21 consternation and I hadn't even thought about that as something 22 to worry about. 23 And even when we eventually did work it out on Now, that caused the paralegals all kinds of But if it were possible, and recognizing the states 24 have the right to make their own decisions on what could be 25 substantive in the end, but just on a procedural level, if you For The Record, Inc. Waldorf, Maryland (301)870-8025 23 1 could get one point person who would have the power to speak 2 for both, so we didn't have e-mails going back and forth that 3 were inconsistent on the resolution of this or that nicety in 4 the language, and we could just do it once -- I can't believe 5 the states have that strong an interest on these minor 6 procedural details that they couldn't agree to give John their 7 power of attorney or whatever to resolve those minor 8 differences. 9 It would save a lot of time. 10 coordinate that better. 11 be addressed in the reform. 12 MR. RICHMAN: And there is a way to That is one area which doesn't seem to Can I ask a question? Has anybody else 13 had the experience where the state issued a CID that was 14 different in the details, if not substantially different from 15 the FTC Second Request? 16 MR. THOMPSON: 17 which to draw a valid sample, obviously. 18 19 20 21 22 Like I said, it's not enough from MR. RICHMAN: No, no, I'm not trivializing the issue. MR. THUMANN: There is some additional or I -- supplemental that you could, in my experience, accept as -MR. RICHMAN: Right and it's broad. 23 is everything that was given to the FTC. 24 experience we've had. 25 MR. HOFFMAN: What they want That's the general So it might be a little bit For The Record, Inc. Waldorf, Maryland (301)870-8025 24 1 logistically easier in terms of that kind of problem. 2 MR. HIBLER: 3 be basically livable. 4 MR. HOFFMAN: This is Don Hibler. Okay. I've found that to Ron, did you have any specific 5 thoughts on Second Requests, negotiating them, modifications to 6 issues? 7 MR. REDCAY: I mean, yeah, actually my hopes were 8 dashed when you said earlier that you weren't here to answer 9 questions about how you negotiate 10 most people in this room would like to know what it is you're 11 willing to negotiate away and that is the question that we'd 12 like to have answered. 13 hear from a wide range of people in the room than to have 14 somebody talk generally about the topic. 15 a Second Request, probably I think it actually would be better to But a couple of observations, and I think that one of 16 the things that people in business, particularly big 17 businesses, would be more interested in is the scope, the 18 breadth and the depth of the search than they are with the 19 particular categories because then you don't really 20 particularly care about the breadth of the language of the 21 scope of a particular request. 22 places you have to go look and how far down an organization 23 chart do you have to look? 24 25 What you care about is how many And that is one of the things I think people are very interested in -- how you can negotiate limitations on that. For The Record, Inc. Waldorf, Maryland (301)870-8025 25 1 And that segues or ties into another thing that I think all 2 practitioners think about when you think about a Second 3 Request. 4 change it, but is that there is a difference between a Second 5 Request and a -- there are many differences. 6 an article on the differences between a Second Request and 7 either a CID or a document request in litigation. 8 And some of the statute may be beyond your ability to You could write But one of the things that is a big difference is the 9 interrelationship between the Second Request process and the 10 ability to certify substantial compliance and the timing of 11 your ability to close the merger. 12 behavior affecting conduct that might not occur if, in fact, 13 the Second Request was cumulatively an informational thing and 14 it was unrelated, or the completion of it was unrelated, to the 15 timing that goes into the merger because I think a lot of us 16 think that, you know, you give us some leverage that we don't 17 have and we think if you're worried that if we're playing games 18 with what the timing is and it seemed to me it ought to be 19 divorced of as much as one can through private agreement, given 20 the statutory scheme, as you can, so that both sides don't 21 think there's some game playing going on related to your making 22 a broad Second Request so that you have got a lot of time to 23 consider it, an hour of filling things in compliance and trying 24 to negotiate it, maybe you could have a shorter time. 25 And we've heard all kinds of I think that is a big concern that I know For The Record, Inc. Waldorf, Maryland (301)870-8025 26 1 practitioners talk about. 2 to people to talk about it. MR. HOFFMAN: 3 Other than that, let me open it up Well, let me, just on the timing issue 4 because that is the topic I'd like to hear more about, you 5 know, timing agreements are things that we see many different 6 variants of and there's different ways that you can structure a 7 Second Request in terms of the actual production. 8 You know, one way that some folks have used it is to 9 say, you know, "Okay, here's your second request, but let's 10 just first search only the top 10 -- these 10 people. 11 we'll take a look at that and if we don't find anything worth 12 investigating, we'll just stop at that point. 13 though, we may ask you to search the next group of 10 or 20." 14 In other words, it's sort of like a rolling production, but 15 you're actually structuring your searches with agency input. And If we do, 16 Now the down-side to that is that, in the worse case 17 scenario, you're going to have a substantially extended period 18 before you can certify and I've heard some mixed things about 19 that. 20 that their hope and dream is to never certify, you know, in 21 that they will either determine that the deal was okay and 22 they're going to -- maybe something needs to be resolved, or 23 maybe they can just get the investigation closed. 24 25 I mean, some people in the private bar take the position Or they're going to find out that the agency is going to challenge the deal, at which point they drop it anyway and For The Record, Inc. Waldorf, Maryland (301)870-8025 27 1 they're not going to ever certify. 2 people say, "Our goal when we walk in the door is to certify on 3 the earliest day possible so that the timing shoe is on the 4 other foot and we're very, as a result, reluctant to enter into 5 these kinds of structured or phased searches because that 6 extends our period." 7 On the other hand, some And I don't know if there's any sense out there of 8 which approach you all take or what is the preferable approach, 9 or is this something that varies case by case, or by the 10 philosophy of the lawyer? 11 issue or timing in any of its forms, I'd certainly like to hear 12 some more about that. 13 MR. REDCAY: But if anybody wants to address that Well, that is one of the concerns I 14 think that we have and it does vary from client to client, deal 15 to deal, and probably lawyer to lawyer. 16 negotiations where you're deferring some production, in the 17 back of your mind is that concern that we've got that by 18 deferring this mail, putting yourself in a position where you 19 can't certify in a timely basis, and I guess one of the things 20 you have to think about are the ways that one can not have a 21 deferral but rather have -- what's the best way one can have 22 some agreements of -- people realize they only have to go this 23 deep or you only have to go to a place and it's not a deferral, 24 it's off the table. 25 where the timing aspect is a constant overhang to the But in those kinds of That's a good example of the situation For The Record, Inc. Waldorf, Maryland (301)870-8025 28 1 negotiation and the production of -MR. HOFFMAN: 2 Well, let me -- I think it's almost 3 universally the case that we'll do drastic organizational chart 4 cuts, you know, if people come in, particularly really early, 5 and I would say preferably in the first 30 days, with org 6 charts and start showing us or talking to us about who we ought 7 to be interested in and why, but let's assume that we'll do 8 that. 9 You know, separate and apart from that, let's assume 10 we take a company and we're going to be willing to limit it to 11 40 people that you will have to search. 12 from your perspective to say, "But even out of those 40, you 13 may never have to search them all? 14 and you get us their stuff in two weeks. 15 if we want to go beyond that." 16 uncertainty into the timing that it's just not worth it? 17 18 19 MR. THUMANN: Does it make sense Let's just do the first 10 And then we'll decide Or does that introduce so much Henry Thumann. It's just hard to give an answer to that. MR. HIBLER: It's not going to be very often that we 20 will know the answer to that question early on in my 21 experience. 22 MR. SHER: The one thing that is important, though, 23 is for staff to be receptive to the idea that we can do a high 24 level cut and if the high level cut, you know, if you don't 25 produce any documents that suggest there is going to be any For The Record, Inc. Waldorf, Maryland (301)870-8025 29 1 problem in the market post-merger, then that will be the end of 2 the investigation. 3 I know my question is hard on your side to be able to 4 make that type of commitment, but if there was a general 5 feeling among the private bar that if we did a quick production 6 of the top 15 people of high level executives and we're 7 confident that there are no documents in there that are going 8 to suggest that this merger is going to be a problem, that that 9 will be the end of the investigation. 10 If it's the type of situation where you are using the 11 rolling production as a way to be able to get more time and, 12 you know, you have a fairly good inkling that, at the end of 13 the production the first 15 people that you're going to ask for 14 the remaining 25, then there's no point then doing a rolling 15 production. 16 So as long as the government is receptive and truly 17 receptive to the idea that a rolling production is going to be 18 something that could satisfy your concerns, then I think it's a 19 very good idea. 20 MR. HOFFMAN: I mean, the one downside to that, I 21 guess, is if you look at it from our side, you know, the 22 incentive you're suggesting is somewhat unilateral and, you 23 know, the way I've seen this work to some extent is where what 24 the particular shop the staff have told the parties is, "Look, 25 we're going to look at these first 10 or first 15, or whatever, For The Record, Inc. Waldorf, Maryland (301)870-8025 30 1 and we think it's highly likely that at the end of that we'll 2 be able to say either we're likely to sue you, you know, so if 3 we want to continue with the transaction, let's proceed down 4 the route of getting more information, but you need to know 5 that we're probably going to be thinking of litigation at that 6 point. 7 Or we're likely to say forget it, we've closed." If it looks like there is a pretty high likelihood 8 that one outcome or the other will be, if not determined, 9 hopefully determined or probably determined at the end, it 10 might be the best situation where you can really do that. 11 it does require the parties to put some timing on certainty in 12 early on in the transaction. 13 anything else on modifying or negotiating the Second Requests? 14 I've got a couple of other ideas I can throw out there, but I 15 wanted to throw it open. 16 MR. REDCAY: Anything else on timing? But Or Let me pick up on your comment -- this 17 is Ron Redcay again -- and I think those two words, the "C" 18 word, candor and communication, is always seen in discussions 19 of the Second Request. 20 there are two-way streets. 21 important thing both you and we can do to make this process 22 work better. 23 There are candid communications and That is, I think, the most If we actually knew candidly what your competition 24 theories were and what you thought the problems might be, how 25 serious you thought they might be, and we similarly were For The Record, Inc. Waldorf, Maryland (301)870-8025 31 1 candidly telling you these are the places where you're likely 2 to find whether there is something to what you're thinking 3 about, if both sides have that, then I think the system could 4 work pretty well. But if you don't, I mean, if it's something like 5 6 Marty's example where they wouldn't even meet with them until 7 the Second Request issued, if that is going to permeate the 8 process, then this kind of thing is not going to work at all 9 and the parties are just simply going to revert to that basic 10 game playing that I talked about at the beginning. 11 MR. RICHMAN: On that point, we have had in place a 12 policy, a five-day rule, where five days after issuance, you 13 can call for a meeting and we have to meet with you on the 14 staff level to explain what our theories in case are at that 15 point. 16 because generally if we're issuing a second request in this 17 resource-intense world, we have a reason. 18 lot of push back and I'm wondering if there is something flawed 19 about that process and that it creates a block somewhere in 20 this candor and communication we're looking for -- because I 21 can't figure out why, as private attorneys, you wouldn't want 22 to come in and say, "Okay, what have you got?" I've had no one take me up on that. And I offer it But I don't get a And I -- 23 MR. REDCAY: I can't either. 24 MR. RICHMAN: So you all take advantage of this? 25 MR. REDCAY: Yeah, of course. For The Record, Inc. Waldorf, Maryland (301)870-8025 32 1 MR. THOMPSON: One of the other things that might be 2 either formalized or explained in advance more often is it 3 seems like there is a way in which data is, for lack of a 4 better word, dumped on you, is always an issue. 5 there are always questions that seem they're taken literally to 6 require the data to be put in some format that the client 7 stated, "We can't do that." It seems like 8 And my best luck is just having the experts, the data 9 people, talk to your data people, and the lawyers kind of stand 10 aside even though it smells like malpractice, unless you're 11 really confident. 12 how you would recommend that be done and what protections there 13 might be in such an issue where you don't have quite the 14 malpractice fear about letting the data people talk to your 15 people with minimal lawyer involvement. 16 it and you sort of take the chance. 17 But if there was something spelled out about MR. HOFFMAN: Like I say, I've done Is there something we could put into 18 the model Second Request or somewhere else that would help with 19 that problem? 20 quite a few people that, you know, there are these fundamental 21 disconnects on data which are exacerbated by the fact that the 22 parties negotiating them, the lawyers on both sides rarely 23 understand what they're talking about. 24 constantly going back to their data people and by the time the 25 translations go up and down and back and forth, no one knows Because that is a suggestion we've heard from For The Record, Inc. Waldorf, Maryland (301)870-8025 So if they are 33 1 what they're doing. So getting the data people together seems 2 like a great idea. But I hadn't heard before about this 3 particular aspect of the problems with it. 4 certainly something we could think about trying to do 5 something. 6 problems or thoughts on data? More on Second Requests? 7 MS. SCHECHTER: 8 MR. HOFFMAN: 9 But that is Data issues? Translation. Translation. Go ahead. Introduce yourself. 10 MS. SCHECHTER: I'm Minda Schechter, I represent 11 foreign companies. 12 the deal. 13 if you mentioned that, I wonder if you had anything. 14 Any other And a Second Request for translations ends It's just too burdensome. MR. HOFFMAN: And I was just wondering, Well, let me outline for you sort of 15 the pro's and con's. I mean, on the one hand, we don't have 16 the resources or the ability to engage in wholesale translation 17 of foreign language documents, particularly today where major 18 companies are located all over the world and might have 19 documents in literally any language. 20 possible for us to review transactions where if we didn't have 21 the ability to shift that cost to the parties, it's impossible 22 for us to review transactions. And it frankly is not So it would be a real problem. 23 On the other hand, you know, I can certainly see the 24 problem where if you're a foreign company and you have a huge 25 number of documents and translations are really expensive. For The Record, Inc. Waldorf, Maryland (301)870-8025 The 34 1 model Second Request and the various guidelines on practice in 2 this area suggest some ways around that. 3 things parties can do. There are a lot of I've seen this come up recently and this is one of 4 5 the issues that's actually now been twice appealed to the 6 General Counsel constituting two of the two appeals to the 7 General Counsel's office; some other issues came up in both of 8 those, but this was the common theme. 9 things you can do in terms of proposing summaries of documents, 10 getting together to meet with the agencies outlining who, what 11 kinds of documents relevant to U.S. markets or U.S. consumers 12 will be found where and what might be done to translate those. 13 I mean, it's a lot of things you can propose. But there's a lot of Have 14 you tried to explore those sorts of things? 15 something we should provide some more formal guidance on? 16 MS. SCHECHTER: 17 were still too broad to translate. 18 summary and so forth, but the part -- I mean, we have to know 19 it all in the documents, so we have to get it translated to 20 know. 21 work, you know, if your Second Request is comprehensive for a 22 foreign language company, but it's just so burdensome. 23 interesting phenomenon because you're dealing with a lock of 24 merger by requesting a translation of it. 25 Yeah. Or is that In my experience, the requests Like we have the soft But if the summaries were still perhaps a little less MR. HOFFMAN: It's an I wouldn't say that that's an okay For The Record, Inc. Waldorf, Maryland (301)870-8025 35 1 outcome. I mean, I don't think the agency would take that 2 position. But we have to be able to review deals. 3 get a deal where the vast bulk of the significant documents are 4 in a foreign language, it really puts a significant 5 institutional strain on us. 6 And if we In other words, we simply do not have the capability 7 to do mass wholesale translation of documents produced to us in 8 any language, let alone multiple languages. 9 love to hear suggestions on the ultimate mechanisms we could 10 employ to reduce the burden in that because I think it's a 11 really real burden. 12 General Counsel both involve that issue suggests that this is a 13 real problem. 14 15 16 I mean, I would And the fact that our two appeals to MS. SCHECHTER: But you do have some other agency guidelines or whatever acceptable -MR. HOFFMAN: The main ones that I'm aware of and I 17 think Peter, John, or Norris could probably speak to this 18 better than I could, but the ones I'm aware of are first of all 19 coming in and explaining to the staff, you know, kind of who, 20 what and where, sort of a modified version of the org chart 21 reviews where you explain what it is and what kind of documents 22 and which people in the foreign offices, including foreign 23 headquarters, are likely to have documents relevant to the 24 issues that we'd be interested in, and on which particular 25 topics and which specifications, for example, might now have For The Record, Inc. Waldorf, Maryland (301)870-8025 36 1 any relevance to documents that would be maintained abroad or 2 in a foreign language, or if they were, you know, as a needle 3 in a haystack thing that likely is low, that would be 4 significant. People will listen to that and then, if you can 5 6 narrow the scope down using summaries, overviews, that sort of 7 thing, you know, the cost of having a translator quickly review 8 things and give me an oral summary is much lower than doing a 9 full scale formal written translation. 10 sort of a series of these kinds of mechanisms, I think you can 11 reduce costs. 12 problem. But I don't have a magic bullet answer to this I would be interested in hearing. MS. SCHECHTER: 13 So if you can employ But is that on a case-by-case basis 14 of particular transaction, the attorney and government would 15 decide which names issue acceptance summaries and so forth? 16 And there is no -- (inaudible)? 17 government would make a decision on what particular transaction 18 or particular company -- (inaudible). 19 20 MR. HOFFMAN: yes. Maybe each attorney in the The short answer to that question is Peter? 21 Mr. RICHMAN: But if it's part of the standard 22 negotiation practice, I mean, there's two scenarios that can 23 come up. 24 country that has a language other than English. 25 where it is a subsidiary, and I've never met the first issue. One is where the party is headquartered in a foreign For The Record, Inc. Waldorf, Maryland (301)870-8025 The other is 37 1 And the second issue, I've had people come back to me and say 2 it is a modification, like a subsiding modification. 3 Here is what the sub does, here is who they 4 communicate to, and here is the high level communication 5 document that goes into the strategic planning or the 6 competition arm or the sales arm of this transaction. 7 really want it? 8 level strategic documents and when you have them search, very 9 limited search that way, rather than a broad-based search from 10 foreign headquarters and try to work it out that way. 11 usually the negotiations -- it's usually an understanding of 12 how the company works and who the people report to, and then 13 you try to narrow it down. 14 Do you And with very few exceptions, I've gotten high MR. HOFFMAN: But Let me say institutionally and to some 15 extent, especially if you don't do this kind of stuff where 16 there is a whole lot, our internal practices might be a little 17 bit okay, but it is not just the first staff attorney that you 18 work with. 19 but there is a lead attorney on the investigation, then there 20 is the director or deputy assistant director of the shop, and 21 you can talk to those people. 22 informally, to the Bureau. 23 - or at the Bureau Director level has gotten directly involved 24 in cases where the negotiation process broke down. 25 it is simply because the parties just have lost the ability to That is who you do your initial negotiation with, You can also talk, again And the Bureau of Competition has - For The Record, Inc. Waldorf, Maryland (301)870-8025 And often 38 1 communicate. 2 help. 3 And sometimes having somebody else come in can And then ultimately there is the appeal of the 4 General Counsel's office. 5 process and it's basically about a five-day turn-around or so. 6 It's a quick letter and then -- believe me, I've worked on 7 writing one of these briefs -- it's a really really really 8 short brief. 9 your point in, you come in with your argument, and General 10 Counsel will decide it. 11 And that's an extremely expedited It's hard to say a lot in it, but you can get You know, if you have an issue where you just have an 12 insufferable burden and you're not making any headway, I'd 13 encourage you to get a piece of that. 14 try really hard and, I think, succeed in not holding that 15 against you. 16 resolve these issues and that's why we have this appeal to a 17 neutral party. 18 other thoughts on translation or any other issues? 19 you want to talk about or lead us into electronic documents? 20 I think the staff will They recognize that sometimes people just can't Any more on modifications, translations? MR. RICHMAN: Any Peter, do As companies have moved to more and 21 more paperless operations, we have found increasingly that a 22 number of issues keep coming up and I've broken them down into 23 four and anybody help on any of these issues because they're 24 both substance and burden issues for us. 25 and data format attachments, which I'm sort of blending For The Record, Inc. Waldorf, Maryland (301)870-8025 Number 1 is e-mail 39 1 together because I think that's the most accessible electronic 2 information. 3 Number 2 is native format spreadsheet database files 4 and ownership and control of those. 5 who the last person was, who the initial author was who touched 6 a document. 7 is not as sound as we might wish it to be because we don't know 8 who owns the stuff that we're getting. 9 party's perspective, what keeps coming back to me is there is 10 no way for you to track it once we've got it because you can't 11 Bates stamp an Excel file. 12 There are ways to track But the relevance is high. Our reliance on them From the private If we actually can and we come up with some novel way 13 of doing that, but they involve long discovery depositions, 14 "Did you write it? 15 waste of a lot of your clients' money and everyone's time. 16 Did this come from your file?" And it's a The third issue that keeps coming up is shared server 17 space where companies don't have good document tracking 18 policies imposed on the employees and you may have an entire 19 Department or division sharing a server drive. 20 certain about their own sub-directories but anybody can use 21 anybody's -- anything anybody else wrote. 22 into software that is actually meant to have people share files 23 and jointly develop electronic production. 24 And finally Archives. 25 get what we need? And everyone is And then you run Of all of the above, how do we How do we know whether we need any of it? For The Record, Inc. Waldorf, Maryland (301)870-8025 40 1 And how is it kept? And in this post-Year 2000 world, how do 2 we know what burden we're actually imposing when we're asking 3 somebody to re-create a legacy system in order to get data that 4 wasn't migrated forward? 5 you want to talk to any of this? 6 MR. BENDELL: That is my sorted list. Adam, did Yeah, though I'm going to add to it. 7 have been the President of SV Technology. 8 and law firms cope with large civil discovery and Second 9 Requests and special electronic media, so that's where we're 10 coming from, the logistical problems of doing that. 11 thought I'd pick up a few different problems, Peter. 12 I We help companies And I One is the standard definitions of a couple of 13 anachronistic things that I'd love to see you folks give some 14 attention to. 15 description of the document retention policy of the company, 16 which calls for an identification of all automated information 17 systems used by the company. 18 literally in a technology company, that these things always get 19 negotiated, but it's not even, I think, a useful starting 20 point, rather than those that might contain responsive 21 documents, for example. 22 The first one is the spec that calls for the Imagine trying to do that And the second one is in the privileged section of 23 the definitions, there is language that asks the Respondent to 24 identify encryption method for any e-mail that was sent via the 25 Internet -- this one is not always in there, there are For The Record, Inc. Waldorf, Maryland (301)870-8025 41 1 variations. But I think that is a reference to a now 2 thoroughly discredited idea that the lawyer waives attorney- 3 client privilege if he sends an e-mail, if he sends an e-mail 4 to his or her client via the Internet that is not encrypted. 5 And, I mean, that is just not -- no one has really 6 seriously taken that position for years now. Again, the 7 weaving of this into the privilege log is -- I've never seen it 8 actually done, but it is typically subject to negotiations. 9 terms of electronic data, it is incredibly -- as Peter said, 10 most of our clients have shifted dramatically in the last five 11 years to electronic storage. 12 the production from a large company is sourced in electronic 13 data, a very dramatic change from maybe 30 percent five years 14 ago. In We now find that 80 percent of And that change has worked, but all the implications 15 16 of that have not worked their way through the system as it 17 were. 18 out everything that is electronic to paper and then if there is 19 some electronic handling of those documents by the parties 20 representing the company to prepare for production, they're 21 being scanned back into an electronic format and handled in 22 that way, and the print is nutty. Many of these productions are still handled by printing 23 And so a pure electronic production has benefits for 24 both private bar and for the government, keeping things in an 25 electronic format. That can go all the way to an electronic For The Record, Inc. Waldorf, Maryland (301)870-8025 42 1 production to the government. We recently did a production on 2 behalf of Hewlett Packard in the Compaq merger, which was what 3 is now a very large technology merger, where the production was 4 made to the government in electronic format in a system that we 5 hosted -- the company hosted for the government. And I think, Norris, you were involved in that. And I 6 7 would be interested in your feedback on how it works from the 8 government's perspective. 9 MR. WASHINGTON: Well, I mean, from our perspective, 10 it worked very nicely. 11 handle, yet a way of sorting and organizing the data, the 12 structures of the data, based on how you actually produced the 13 information. 14 there is a little bit of a learning curve, but really not that 15 high. 16 It meant fewer amounts of paper to So in that way, it was very beneficial. MR. BENDELL: I mean, So I predict that we will see more of 17 this now that we have gotten the precedent of you folks 18 accepting this in very large scale. 19 scale situations before, but as the bulk of the production, 20 there are enormous advantages of both size and folks will be 21 able to navigate their halls without banging into all the boxes 22 that typically line them. We have done it in smaller 23 One issue there that relates to the timing of 24 production if you're negotiating Rolling Production, there are 25 some differences in the characteristics of that if things are For The Record, Inc. Waldorf, Maryland (301)870-8025 43 1 being handled electronically. 2 flexible than a purely paper-based human process. 3 kind of queue things up. 4 to fill the pipeline with documents that need to be 5 electronically collected or electronically converted, and so 6 forth. 7 These processes are less You have to It takes a long time to get stuff in Once the pipeline is filled, we can deliver an 8 enormous number of documents on an ongoing basis. But changes 9 in, for example, who we are collecting from are more difficult 10 to accommodate in that process. 11 idea of taking people from an org chart sequentially, sort of 12 the first 15, and then we'll look at that for 20 days and 13 decide if we want to go over. And so there's kind of the It is more difficult than a purely electronic 14 15 production because it takes time to sort of fill the pipeline 16 and it's easier to just sort of rev the engines and go. In terms of the Native Format issue, we think it more 17 18 efficient for everyone to convert to some kind of uniform 19 format in files or PDF, rather than trying to produce 20 everything in Native Format, produce to you folks the strange 21 viewers that you might need or applications to look at, odd 22 files. 23 I think it's reasonable for you folks to request 24 specific documents in Native Format if you need them. 25 that's a much more expeditious approach than trying to review For The Record, Inc. Waldorf, Maryland (301)870-8025 I think 44 1 everything in Native Format. 2 spreadsheets that we're going to formulate, the result itself 3 isn't self-explanatory -- 4 MR. RICHMAN: So if you need the actual Let me ask you a question on that. 5 When you say that we should request specific documents you are 6 talking about a specific spreadsheet? 7 spreadsheets? 8 MR. BENDELL: Or all Excel No, specific spreadsheets. In other 9 words, I would contemplate some kind of -- and this is only 10 going to work, I think, in the context of a Rolling Production, 11 but some kind of back and forth where you reserve the right to 12 request the Native Format for specific documents. 13 referring entire class of documents, but for specification. 14 MR. RICHMAN: I'm not And the company can't certify until 15 we're done? I mean, that's the question really that comes up 16 there is, you know, no matter how good a job we all do at 17 winnowing these things down to the documents that are actually 18 -- it's not just relevant, but of importance -- we're not going 19 to get to all of them, even on a Rolling Production, in perhaps 20 the timely fashion that might allow us to say, "Okay, work 21 product aside, give us these 22 spreadsheets." 22 folks suggest that to me and I come back with, "Then you're 23 willing to not certify until we're done." 24 that I got from the room which is just, "You must be kidding!" 25 So that is something that I would be very interested For The Record, Inc. Waldorf, Maryland (301)870-8025 And I've had And the response 45 1 in understanding how we could speed that process up. 2 want every spreadsheet that a company keeps. 3 benefits of a paperless office are lost if you look at it in 4 the entirety of how much data is being kept. 5 drafts of a spreadsheet because somebody doesn't save over the 6 old file. 7 review harder. 8 I don't I mean, the I don't want 30 It makes my review hard and it makes your privilege It just doesn't work out. So do you have any specifics that might make it 9 easier to get to the endpoint that you're suggesting, but make 10 it work within our time frame and our very real need to 11 evaluate the information for making recommendations? 12 MR. BENDELL: I guess I would ask you how often you 13 really need to look at the Native Format. 14 is a fear factor that if you don't have it, you will be 15 hindered in some way; but the number of times you really need 16 it is actually pretty small compared to if you can actually 17 look at the output of the document. MR. RICHMAN: 18 It depends on the investigation and it 19 depends on the industry. 20 important, those files are critical. 21 22 23 24 25 MR. BENDELL: data. My sense is that it You know, where econometric data is But that's a very specific band of It's not the entire request. MR. RICHMAN: I'm possibly the wrong person to ask. My last four or five cases were made on spreadsheets. MS. LLEWELLYN: Hi. My name is Virginia Llewellyn For The Record, Inc. Waldorf, Maryland (301)870-8025 46 1 and I'm with a company called Applied Discovery. I would 2 second everything Adam just said and we actually worked on the 3 other side of the HP/Compaq process, so I think everyone 4 learned a lot from that and learned that electronic production 5 was the way to go, particularly with regard to spreadsheets. 6 The real benefit of going to a format like PDF vs. 7 Native is a couple of things. 8 issue of Bates numbering and having trouble with Native files, 9 you can't apply a Bates number. 10 obviously, when you convert to something like PDF. 11 thing that can be done in the conversion process, or the 12 display process, when the original file type is converted to a 13 PDF file, all of the metadata or data behind the spreadsheets 14 can be saved and conserved and displayed in some format, side 15 by side with that PDF file. 16 First of all, you mentioned the You can solve that problem, The other So the most common things that people are interested 17 in in spreadsheets are formulas that are associated with the 18 numbers that you see displayed with words that just print, any 19 comments in the fields, that sort of thing. 20 information can be exposed, preserved, displayed in the PDF 21 process if that is required in a particular case. 22 All of that If you don't think you're going to have a serious 23 issue with that kind of information, you can process them 24 quickly without all of that amount of data. 25 it's going to be a problem, you can request that up front. For The Record, Inc. Waldorf, Maryland (301)870-8025 But if you know And 47 1 as Adam said -- (inaudible) -- if the electronic production is 2 putting up with specifications of the production in advance so 3 you know how to move forward very quickly and efficiently. 4 And then you can process that data in half the time 5 and half the cost of making a paper production. 6 simply I think in most cases a matter of knowing what you need 7 to ask for. 8 MR. RICHMAN: It's just Is the conversion of Native format 9 files to PDF, whether or not you I guess are including the 10 metadata, cheaper than just copying it and handing it over? 11 MS. LLEWELLYN: Absolutely. We have had a number of 12 conversations with Rich Corbett of our New York Office and I 13 think we have provided actually substantial documentation about 14 some of the differences in producing in paper vs. producing 15 electronic format in terms of the cost and the timing -- 16 MR. RICHMAN: Yeah, I'm not doubting that it saves 17 money to produce an electronic format for TIF files. 18 especially if there are multiple states involved and those 19 states want their own copies. 20 CD's or, as you did over the Internet. 21 more money. 22 spreadsheet, or I'm giving more kudos to Microsoft, spreadsheet 23 files or database files, rather than just copying those onto a 24 CD and sending us the CD of data. 25 I mean, I mean, you know, copy over some I mean, it saves even I'm asking for the Native Format Excel I mean, it seems you're adding a step to the process For The Record, Inc. Waldorf, Maryland (301)870-8025 48 1 that goes even beyond my nightmare which is somebody just 2 hitting print on a spreadsheet and me just getting whatever was 3 designated on the format of the originally kept file. 4 question is converting an Excel spreadsheet to a PDF file, 5 saving the metadata, and then giving us that -- what's the cost 6 difference compared to just copying the original file? 7 MS. LLEWELLYN: So my Well, I think the real crux of that 8 issue lies in the fact that that conversion is an automated 9 process and it's a process that the technology has been 10 leveraged to do that very quickly. 11 as an extra step because you started with an original file, and 12 then you're doing something between, the real cost savings is 13 in the turnaround time, being able to process that information 14 electronically versus dealing with a printer and a copy vendor 15 and whoever else may be involved, and a Bates number and 16 somebody sort of tracking the mechanism. So while we think about it 17 I mean, the time that is saved in not just 18 transmitting the information to the Commission, but also the 19 time that is saved on the reviewer's side is information that 20 can be searched and accessed electronically instead of 21 requiring a manual review. 22 MR. BENDELL: Two more points, one in which I would 23 have expected to hear before now, and that is the requirement 24 to sort by specification number. 25 the Department of Justice did not have, that is a major That which your colleagues at For The Record, Inc. Waldorf, Maryland (301)870-8025 49 1 impediment to efficiency and I can't imagine that what you get 2 is very helpful to you because the judgment calls that are made 3 in putting documents in very broad specifications vary so much 4 from lawyer to lawyer that even with the best intentions, it is 5 hard to do it well. It also requires that every single document go 6 7 through a page by page review, particularly in the electronic 8 world. 9 do this, to organize documents and specification that's driving 10 that. 11 large Second Requests. 12 value you get from it given the burden it imposes on a company. 13 That is not really necessary. It's the requirement to And that is the key part of the expense of responding to So I would urge you to consider the And then the second thing is just to chime in on the 14 whole Archive Tape issue. 15 tapes are made for disaster recovery purpose, not to aid in 16 civil discovery. 17 servers on a regular basis in order to restore them if there is 18 an earthquake or other problem, and the idea that we can go in 19 easily and find all the e-mail of Mr. Smith on a certain date 20 is just not so. 21 Archived Tapes are made -- data Firms are taking snapshots of their mail I won't take the time to walk through what's involved 22 in actually responding literally to a definition of documents 23 that's in the standard -- in the model request. 24 extremely burdensome. 25 circumstances we can't go after targeted -- that's if you have But it's That's not to say that in particular For The Record, Inc. Waldorf, Maryland (301)870-8025 50 1 a particular concern. 2 wholly on record. MR. SHER: 3 But as a blanket approach, I think it's I think that's very important to keep that 4 in mind when you're considering -- Scott Sher -- it's very 5 important to keep that in mind when you're considering the 6 sheer cost of doing that. 7 company to put back-up tapes back onto a server and then to -- 8 I guess back-up tapes generally are done by month or by year or 9 by a certain time period, rather than by custodian -- and to 10 require the restoration of an entire back-up tape onto a 11 server. 12 It's extraordinary to require a It's just very, very expensive and adds an incredible 13 amount of time to the process. 14 sorting by specification is that I've never heard from the 15 agencies nor from the FTC that they were concerned with how we 16 ultimately decided to sort by specification and because the 17 categories are so broad, you're really not getting any 18 meaningful sorting. 19 But the main problem with But what you are doing is you're taking quite a bit 20 of lawyer time to require the sorting by specification and 21 you're getting no added benefit to the agency. 22 heard anybody say, "Well, this is more responsive...," you 23 know, from the government saying, "This is more responsive to 24 spec 2 than spec 13." 25 sorting is self-serving and it doesn't really get the I've never So it's really ultimately the party For The Record, Inc. Waldorf, Maryland (301)870-8025 51 1 government anything in the end. 2 MR. RICHMAN: Anything else on electronic data? 3 MR. THOMPSON: Just one question really. On the 4 initial filing of the HSR, have you folks made a decision 5 whether it's routinely acceptable to send those documents that 6 are filed with regulatory agencies by link rather than -- I did 7 that a few months ago and they told me it was a pilot project 8 and they would decide whether that would be routinely 9 acceptable. I never heard whether that -- 10 MR. RICHMAN: You mean for the SEC files? 11 MR. THOMPSON: Yeah. I mean there was one highly 12 regulated market where we had just a lot of volume. 13 said, how about sending it by link? And we He said okay. 14 MR. HOFFMAN: I think we're going to make that 15 routinely acceptable. 16 right now, I don't know what the exact status of that is, but I 17 believe that that's where it is going to end up -- and it may 18 be pretty soon. If there's a project on that going on 19 MR. RICHMAN: Anything else? 20 MR. BENDELL: One other thought. The de-duping of 21 electronic files is much more scientific than the removal of 22 duplicate in paper. 23 done in a more automated way. 24 negotiating that? 25 in many circumstances. If there are better indicia, they can be Have you found any resistance in It seems like it would be of mutual benefit It does require that you have a known For The Record, Inc. Waldorf, Maryland (301)870-8025 52 1 set of custodians from whom you are collecting the e-mail. 2 unwind it is very problematic. 3 MR. HOFFMAN: Let me say one word about that. 4 model Second Request does not require the production of 5 duplicate documents. 6 modification to de-dupe the file. 7 MR. BENDELL: To The So technically, you don't need any You're interpreting that as sort of if 8 two people have an e-mail, the fact that it was in one person's 9 file, it doesn't need to be produced twice? 10 11 12 MR. HOFFMAN: Correct. Non-identical copies need to be produced, but not identical copies. MR. BENDELL: And the fact that I'm the recipient on 13 one line and you're the recipient on another, you don't 14 interpret as a different copy? 15 MR. HOFFMAN: No. 16 MR. BENDELL: That's not uniformly -- 17 MR. HOFFMAN: I know, but every time that's been 18 called to the Bureau's attention, our position on that has been 19 -- and this has been an issue of some recent relevance -- but 20 every time that issue has been brought to the Bureau's 21 attention, our uniform position is that the mere fact that a 22 document has gotten to a different person's file does not make 23 it a non-identical copy. 24 25 MR. RICHMAN: But going along with that is a presumption that everybody on the recipient and cc list For The Record, Inc. Waldorf, Maryland (301)870-8025 53 1 received that document, opened it, and read it. 2 the argument comes down the road when we drag the vice 3 president of sales in for an investigational hearing and don't 4 show her an e-mail because it was in her files and it's not 5 ambiguous and there's no real reason. 6 Commissioner's office and we're recommending, and, we hear that 7 person never received that e-mail and staff never asked that 8 question. 9 wanted to make sure that we had that trail was so that we could 10 use it in discovery, if we needed to, and if we went down the 11 road to a trial. 12 So, I mean, And then we end up at a So, you know, the reason, at the staff level, we MR. HOFFMAN: Peter's point is an excellent point. 13 You know, historically, it was so much more expensive to remove 14 duplicates than to just produce them that people produced them 15 and you didn't have this problem where they may suddenly 16 disappear. 17 person. 18 that now with having the To/From, CC list and just assuming 19 they've all seen it. 20 didn't read e-mails are going to have much less resonance with 21 us than with what the e-mail actually says, 1) -- and the same 22 is true with other documents -- and 2) again, the second 23 request does not call for the production of identical copies 24 and the mere distribution doesn't change it. 25 that we care about. You know, you don't get them associated with a And instead of having them in the file, we've replaced But again, people saying they did or It's a two-edged sword. For The Record, Inc. Waldorf, Maryland (301)870-8025 It's the content 54 1 MR. RICHMAN: Norris? 2 MR. WASHINGTON: Well, I guess I need to address the 3 topic or bring up the topic of access to transcripts and Third 4 Party Discovery. 5 outside counsel, one of the big irritants that seems to occur 6 is when they ask us to turn over their investigational hearing 7 transcripts and we say, "Well, we really can't. 8 a matter of policy that we don't turn them over." I noticed over the years that in dealing with We have it as 9 And I noted over the years that the policy has 10 changed and I realize that this has been an issue that has been 11 brought up many times. 12 one person who is going to address this type of issue. 13 MR. SHER: And Scott Sher is going to be at least Well, I consider the first issue, access 14 to transcripts, as almost a throw-away and an easy area that 15 the agencies could reform the process. 16 -- and Norris, the last one that we did with you -- we get 17 access now to that deposition transcript and we've gotten 18 access to investigation hearing transcripts and it's really the 19 only result that seems to make any sense. 20 process that should really be transparent and investigatory, 21 rather than litigation oriented, it only makes sense to give 22 parties access to comments that they had made. 23 So we've actually seen You know, in a If your goal is ultimately to be able to allow the 24 parties to expand on or clear up any points that were made 25 during the hearing, that had come up. For The Record, Inc. Waldorf, Maryland (301)870-8025 And they don't have 55 1 access to the transcripts of those depositions or hearings. It 2 just doesn't really make any sense. 3 Marty was talking about the low hanging fruit that had been 4 picked with recent reform, and I think we can completely fix 5 that problem very easily by making deposition transcripts, as a 6 matter of course, available to the parties. And I think that's one -- 7 And, again, I think it's more of a procedure that you 8 have to change rather than substance because I have seen in the 9 last several investigations that we've done that we've actually 10 gotten access to our transcripts. 11 the process. We can clear up any points that were made during 12 the hearing. You're also ultimately going to invite more 13 papers and briefs explaining why we said something that we had 14 said or clarified things. It really does facilitate But really, in the end, it's going to enable us to 15 16 clear up any ambiguities that were raised during those hearings 17 or depositions. 18 Party? Did you want me to move on to Access to Third 19 MR. HOFFMAN: Yes. 20 MR. SHER: We see several issues with Access to Third 21 Party information. One is parties getting access to the nature 22 of complaints from third parties. 23 corporate citizens who are given a CID or a call from the 24 government, and then the people who affirmatively go to the 25 agencies and complain. We see the third party I think each one is a different area. For The Record, Inc. Waldorf, Maryland (301)870-8025 56 As far as parties' access to Third Party Information, 1 2 I think it would be very helpful if the agencies were upfront 3 and communicated from the get go, not necessarily obviously who 4 has raised complaints, but the nature of any complaints that 5 you might have received. 6 complaints that you receive are from a particular standpoint 7 where people have particular agendas when they are bringing up 8 complaints. Because you know that a lot of 9 So what we would encourage and what we find as being 10 most helpful is, without revealing the source, obviously, it's 11 crucial to keep the process open for third parties to come and 12 complain. 13 received from these third parties that we might be able to 14 present the fuller picture, or at least we know where you're 15 coming from in your investigation. 16 But to tell us what type of information you have It would be extraordinarily helpful if we had that 17 information up front and right away, that we might be able to 18 completely discount information as it had been brought by a 19 third party or explain why that particular viewpoint has been 20 presented. 21 presented. And we can also rebut any information we've been 22 The bulk of the problem, though, is the Third Parties 23 who are being affirmatively requested for information from the 24 government. 25 even in a simple inquiry, a Third Party, a good corporate And I don't know if you're necessarily aware, but For The Record, Inc. Waldorf, Maryland (301)870-8025 57 1 citizen who receives an inquiry from the government, and it 2 costs $50-100,000 in legal fees for that person to respond. 3 It's very expensive. 4 They have to be prepped. To the extent that they're turning over documents, 5 those documents have to be reviewed by their attorneys. 6 just the nature and course. 7 agencies to rely more on live interviews. 8 represented Third Parties and there have been live interviews, 9 you know, we find that you can get most if not all of the 10 information that you need without actually having to rely on a 11 document request, or a CID, or a deposition. 12 It's So we would just encourage the When I've You get what you need and what you want to help 13 further your case and, at the same time, parties are not being 14 over-burdened with what we've seen is basically just a re- 15 written second request in an extreme circumstance as a CID. 16 And for a Third Party, that's extraordinarily burdensome when 17 they're not materially -- you know, they do not choose to be 18 involved in the merger and they might not feel that they are 19 materially affected by the merger. 20 MR. HOFFMAN: Let me ask you a question about that. 21 One of the things that we have done a lot recently is when we 22 have been working on transactions, and these are particularly 23 transactions that seemed problematic, likely to go to 24 litigation. 25 discovery process by going straight to deposition and document We have been trying to shorten the Third Party For The Record, Inc. Waldorf, Maryland (301)870-8025 58 1 requests, but very, very targeted. 2 We're talking like three request lines in the item 3 asking for very specific things and very quick depositions. 4 Part of the two is a Justice problem. 5 any way -- does that exacerbate the problem that you're 6 pointing at? 7 as the live interviews? 8 analytical bias is we give a little more credit internally to 9 deposition transcripts than interview notes. 10 But I wonder if that in Or is it a partial solution, although not as good MR. SHER: I mean, I have to tell you that our Well, I guess you would have to ask 11 whether or not this is a case that you are seriously going to 12 challenge. 13 you plan on challenging, well, of course, you're going to at 14 least need some sort of documentary evidence or a deposition 15 from some third parties. If it's less than a handful of cases a year that Maybe if you have an industry where there are 16 17 hundreds of customers and several competitors, you clearly 18 don't need to request that level of information from each of 19 the Third Parties. 20 considering litigation, I would agree that a targeted 21 documentary evidence request or a deposition probably is 22 helpful. 23 In those cases where you are seriously But they are very few and far between cases where you 24 actually are getting to the point where you are going to be 25 litigating the case. And I would rely first on -- because we For The Record, Inc. Waldorf, Maryland (301)870-8025 59 1 represent quite a number of Third Parties, and generally people 2 are fairly receptive to an hour interview or an hour and a half 3 interview, as long as you're not coming back every week with 4 another hour, another hour and a half interview to satisfy any 5 type of informational demands that you might have rather than 6 requiring people to go through -- any document request is 7 burdensome for a party that is not going to be benefiting from 8 the transaction in the end. 9 put off, the better. 10 MR. HOFFMAN: So to the extent that that can be Anyone else with any comments? We're 11 coming close to the end of the time we've got, but I'd like to 12 have the floor open if anyone wants to say anything, yell at 13 us, you know, constructive suggestions are of course preferred. 14 Well, with that, I guess I will close this. Let me thank all of you very much for coming and 15 16 particularly to everyone who worked ahead of time getting some 17 thoughts together for us and everyone who contributed today. 18 This is extremely useful for us. 19 going to accept written comments from now for quite some time. 20 I do want to stress we are I'm not sure when we're going to wrap this up. We 21 have a couple more workshops scheduled. So my guess is it's 22 not in the indefinite future before we hope to do some things 23 here. 24 about anything that we discussed today, or if anything comes to 25 mind, anyone else in their respective firms or organizations But there's a little bit of time, so if people think For The Record, Inc. Waldorf, Maryland (301)870-8025 60 1 that have things you want us to know, please get them to us. 2 The hopeful outcome of this is that we will make some changes 3 in the way we do some things. Obviously, we're getting a lot of input and feedback 4 5 on a lot of points and we have to sit down and assimilate it 6 all. 7 consistent themes and some things that varied from place to 8 place. 9 this process work as well as it can for everybody. 10 much. 11 But it's been extremely helpful and we've heard a lot of So we want to take it all into account and try to make Thanks very (Whereupon, the discussion was adjourned.) 12 13 C E R T I F I C A T I O N O F R E P O R T E R 14 15 DOCKET/FILE NUMBER: 16 CASE TITLE: 17 HEARING DATE: P019503 MERGER BEST PRACTICES WORKSHOP JUNE 25, 2002 18 19 I HEREBY CERTIFY that the transcript contained herein is a 20 full and accurate transcript of the notes taken by me at the 21 hearing on the above cause before the FEDERAL TRADE COMMISSION 22 to the best of my knowledge and belief. 23 24 DATED: 25 For The Record, Inc. Waldorf, Maryland (301)870-8025 61 1 2 3 4 5 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 6 7 8 I HEREBY CERTIFY that I proofread the transcript for accuracy in spelling, hyphenation, punctuation and format. 9 10 11 SARA J. VANCE For The Record, Inc. Waldorf, Maryland (301)870-8025 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A3722f3a2bb58dbb1. Public record. Not legal advice.