Blog Post

With New Second Request Reforms, FTC Lays Heavier Hand on Competition Control

Understanding impending challenges and how to adapt to new process requirements

With the intent to more effectively and efficiently “scrutinize, detect and challenge illegal deals,” the reforms include:

  1. Merger reviews will be more “comprehensive and analytically rigorous,” and notably, may include consideration of the impact a deal will have on labor markets, cross-market effects, and how investment firm involvement may “affect market incentives to compete.”
  2. Foundational information is now required regarding IT framework and organizational responsibilities before negotiations and modifications regarding the scope of the Second Request will be considered.
  3. Closer alignment with the Department of Justice in terms of e-discovery approvals, to the extent that the e-discovery tools and processes an organization intends to use to comply with the Second Request must be disclosed in detail before they are put into use.
  4. Partial privilege logs will no longer be permitted.
  5. Second Requests and voluntary access letters will be uploaded into a secure system to provide open access to all commissioners.

These updates are significant on several levels. First, they demonstrate tangible action in terms of how authorities in the U.S. intend to carry out ramping antitrust enforcement under the President’s Executive Order on Competition. More, they confirm trends that many antitrust attorneys and experts have been speculating about for the past year—that the agencies are indeed experiencing an unprecedented spike in M&A activity, as well as struggling to manage the massive volume of data they must review as part of adequate competition control.

Beyond the policy and resource takeaways within these reforms are serious strategic, practical and logistical implications for legal teams responsible for managing the Second Request process. For one, a broader scope for Second Requests as outlined in the FTC blog will likely lead to the inclusion of more data and documents. Given the focus on labor markets and cross-market effects in particular, organizations are likely to be asked to submit more documents from a wider scope of individuals across their organization. The Model Second Request is currently being revised and will drive whether the data sets are truly going to continue to grow. Importantly, the FTC has not indicated that it will extend its standard timelines for Second Requests (which are already notoriously compressed) despite a likely increase in data volumes. Therefore, it’s now more important than ever that legal teams to be equipped to defensibly and efficiently conduct document collection, review and production across extraordinarily large datasets.

The new foundational information and e-discovery process approval requirements are additional areas in which teams are likely to face increased complexity and even potential delay. These requirements add new steps and considerations for teams preparing for a Second Request, including providing documentation about how data potentially responsive to the Second Request is maintained. Providing such documentation requires counsel and consultants to collaborate with the organization’s IT department early on to understand and then communicate to the FTC any potential problems the client may have in meeting the FTC’s precise collections and processing requirements. Teams will also need to create and communicate their plans for the use of technology-assisted review and advanced analytics at the outset, and therefore will need the support of experts with experience in documenting these processes, assisting counsel in communicating them to government agencies and navigating the nuances that may impact approval of their use.

Additionally, as part of the alignment with the Department of Justice on approach, a partial privilege log will no longer be accepted as a means to reduce the total volume of documents included on the final privilege log. Further, the FTC will likely scrutinize the final log for deficiencies in the same matter as the Department of Justice. As such, it’s critical that counsel and consultants use log formats and processes that are efficient and robust enough to avoid deficiencies.

The FTC has confirmed that 2021 will mark a record year in the number of mergers and acquisitions filed with U.S. antitrust agencies, at a projected total of 3,500 filings before the end of the year. Findings in the latest FTI Consulting Resilience Barometer also indicate that this trend is likely to continue into 2022, with roughly 90% of global organizations surveyed planning to engage in M&A in the coming year. Ultimately, an active M&A landscape combined with intensifying Second Request oversight will require organizations and their legal teams to be increasingly prepared in advance of a filing and ensure the providers they rely upon are equipped to meet the full extent of the government’s new and evolving demands.

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The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.