This week, the Antitrust Division of the U.S. Department of Justice (the “Division”) announced the return of targeted Second Request investigations intended to expedite merger review (available here). The Division also published a Model Timing Agreement with the announcement. In the past, some merging parties have negotiated similar phased investigations and entered into timing agreements with the Division. This announcement formalizes that ad-hoc process. The Federal Trade Commission did not join the announcement.
The Division’s basic framework for a targeted Second Request investigation is to enter a timing agreement with the merging parties, require the parties to produce a subset of information and documents from priority custodians (“Priority Production”), and determine whether it can resolve its concerns without the merging parties having to certify substantial compliance with the entire Second Request (“Expedited Consideration”).
In particular, under the Model Timing Agreement, the Division will offer the merging parties a meeting with the Front Office within 21 days of the Priority Production date. Within 14 days of such meeting, the Division will notify the merging parties whether it intends to close the investigation, modify the Second Request, or continue with the investigation without any modifications to the Second Request.
The Model Timing Agreement also provides that the transaction cannot close for at least 60 days after the merging parties certify substantial compliance (“Compliance Date”), that the parties provide a 14-day notice before closing, and that the transaction cannot close for 10 days following the entry of a judgment by a court. The Model Timing Agreement also includes a stipulation that if the Division files a complaint to enjoin the transaction, the Division does not need to seek a temporary restraining order or preliminary injunction to prevent the merging parties from closing.
Other notable aspects of the Model Timing Agreement include:
- Additional Custodians: The Division may request up to a certain number of custodians (as agreed by the Division and the merging parties) at any time prior to the filing of a complaint in court, but no more than 20 days after the Compliance Date. Provided the merging parties comply within 15 days, the Compliance Date will not be further extended.
- Document Production Timing: Non-privileged responsive documents must be produced 30 days before the Compliance Date. Documents withheld in good faith for privilege review but determined not to be privileged must be produced 10 days before the Compliance Date. Privilege Log must be produced no later than 5 days before the Compliance Date.
- Data Production Timing: Certain types of data as agreed by the Division and the merging parties (e.g., win-loss or bid data, transaction-level sales data, and profit-and-loss data) must be produced 45 days or 30 days before the Compliance Date.
- Deficiencies: If the Division issues a deficiency letter within 20 days of the Compliance Date, the merging parties shall respond to the deficiency letter within 5 days, either agreeing to remedy the deficiencies or stating there is no deficiency. Any supplemental production will extend subsequent deadlines day-for-day until the completion of such production. If the Division issues such deficiency letter more than 20 days after the Compliance Date, the merging parties shall have 15 days to respond. In this case, subsequent deadlines will not be extended.
- Depositions: The merging parties shall make witnesses available for depositions at least 14 days before closing or 10 days after the deposition is served, whichever is later.
- Post-Complaint Discovery: The merging parties shall not argue in a litigated merger challenge that the Division’s investigation limits the Division’s ability to conduct post-Complaint discovery or shorten its post-Complaint discovery period.
Whether the Expedited Consideration and Model Timing Agreement are appropriate will depend on the facts of a specific transaction, particularly given that, while they can offer benefits to the merging parties, including faster resolution of a Second Request, they come with additional burdens, including additional time post certification of substantial compliance.
If you have any questions concerning the material discussed in this client alert, please contact the members of our Antitrust practice.
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