Managing The Scope Of E-Discovery Requests In Antitrust Matters

Monday, August 1, 2011 - 01:00

The Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) are tasked with carrying out the mandate of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). Under HSR, a party to a merger or an acquisition valued above a certain threshold must provide these agencies with information that will allow them to analyze the proposed transaction. As part of this process, over the years, these agencies have begun to aggressively pursue corporate documents and data, particularly in email, that will enable them to evaluate the transaction's potential anticompetitive effects.

The latest evidence of the agencies' increased invasiveness is the July revisions to the HSR Premerger Notification Rules and the Notification and Report Form, which will become effective in late August 2011. While the agencies claim the new rules eliminate unnecessary and potentially burdensome reporting requirements, they also extend the categories of documents concerning competition that parties must submit, including the following:

• confidential information memoranda and similar documents relating to the acquired entities or assets in the year prior to the filing, regardless of whether sent to the buyer;

• third-party advisor studies, surveys, analyses, and reports prepared for the purpose of evaluating or analyzing market shares, competition, potential for sales growth, or expansion into product or geographic markets for the entities or assets in question, or for the purpose of seeking an engagement, if created within one year of the filing;

• documents prepared by or for officers or directors for evaluating the transaction's synergies or efficiencies; and

• documents relating to the holdings of "associates" that overlap with the buyer or its assets. The rules define an "associate" as an entity that has a direct or indirect right to manage the buyer's operations or investment decisions; has operations or investment decisions managed directly or indirectly by the buyer; controls, is controlled by, or is under common control of a buyer; or manages, is managed by, or is under common operational or investment management with a managing entity.

Widening the scope of responsive documents means parties must expand their search of documents for submission with the HSR form, rendering the premerger notification process more costly and time consuming.

After submitting the premerger form and associated documents, the parties must wait during a specified period of up to thirty days (fifteen days in the case of a bankruptcy sale or a cash tender offer) before closing the transaction. The agencies clear most transactions after reviewing the preliminary information. However, in 2010, the agencies increased their use of second requests, which are requests for additional information, by 46 percent, according to their 2011 Annual Report. That trend may continue to increase, especially in light of the content of the additional documents now required, which may offer additional fodder for the agencies to investigate.

HSR Document Requests Pose Significant Compliance Challenges

As former FTC Chairman Deborah Platt Majoras acknowledged in 2006, "the second request process remains controversial" due to "the cost and time required to comply." During a very compressed timeframe, often between six and nine months, parties often spend millions of dollars in collecting, reviewing and analyzing responsive materials.

The expanded documents sought under the revised rules and form, when coupled with the increased use of second requests, raise compliance challenges for parties as the burden of collecting information in the electronic age continues to grow. Typical agency requests are termed as broadly as possible to encompass a variety of hard copy and electronic documents. For example, the FTC's model second request broadly defines "documents" as "all computer files and written, recorded, and graphic materials of every kind in the possession, custody or control of the company," including email, electronic drafts and metadata, among other things. The model also defines "computer files" as "information stored in, or accessible through, computer or other information retrieval systems." The proliferation of means to create and store electronically stored information (ESI), such as email, voicemail, social media, instant messages, text messages, and software applications, combined with the decreased cost of storing, archiving and backing up this information, has further increased the scope of information subject to production. In addition, under the agencies' definitions, employees who carry portable electronic devices, including smartphones and thumb drives, extend the realm of responsive data to offsite locations. Thus, collecting and reviewing this information for production requires companies to expend substantial resources.

Although only a fraction of filings results in requests for additional documents, parties should proactively develop a response plan that involves communication, project management and advanced technology to minimize the impact of a second request.

The Importance Of Internal And External Communication

The agencies acknowledge that requests for documents are often broader than they need to be. Additionally, the agencies sometimes not only ask parties to produce all possibly responsive documents but also require that the most relevant material be submitted as quickly as possible.

Counsel must have a plan in place before they receive a second request so they can hit the ground running. The first thing counsel should do upon receiving a second request is engage in a conversation with the agency to restrict the scope of the request. Before attempting to negotiate with the agency, counsel should possess a thorough understanding of an organization's personnel, operations and information management systems. That means counsel must have a comprehensive knowledge of the pool of potential custodians and, if possible, a data map of the organization's ESI. Armed with this information, parties can often negotiate limits upon the required production of data.

Using Project Management To Develop A Discovery Plan

Before meeting with the agency, counsel should acquaint themselves with the DOJ's "Electronic Production Letter" and attached "Questions about Electronic Systems and Back-up/Archiving Policies," which reveal the types of documents required for production and the format in which parties should produce them. The questions focus on the types of computers and other electronic storage devices (such as smartphones), email retention and use of backup media. In addition, counsel should review the DOJ's "Questionnaire on Electronically Stored Information." This detailed questionnaire covers document retention policies, IT infrastructure, computer hardware and systems (including employees' personal computers used for business purposes), handheld devices, storage media, legacy systems, software applications, document management systems, Internet and intranet sites, web-based services (including social networking sites such as Facebook and Twitter), databases, backup systems and preservation practices.

To develop a plan for corralling and producing this wide range of information, counsel should implement solid project management best practices. First, counsel must assemble and align a comprehensive team that includes representatives from legal, IT and other pertinent areas. External project management experts with particular expertise in e-discovery are often helpful in putting together a comprehensive project plan that details how the project will be executed under tight timelines. They can also help define the data landscape, determine the best staffing arrangements to meet goals, estimate the potential volume of data, create a realistic budget and set appropriate expectations.

Employing Technology To Meet Agency Expectations

The tight timelines for producing documents in response to a second request mean parties must act quickly. The best way to accelerate the review of a client's data is by leveraging technology. Working with an e-discovery provider can help counsel determine the best technological methods to speed case assessment and review.

Many providers have extensive experience working with these agencies and can develop a detailed discovery plan that meets an agency's deadline and formatting requirements. Generally, these agencies require parties to produce records in an imaged format (for example, TIFF), with the exception of files such as databases, spreadsheets and presentations, which parties are often required to produce in native format. In addition, both agencies prescribe the required metadata fields to produce with various document types. Finally, the agencies have specific requirements for the way parties must submit electronic files. If parties have questions about production, partnering with an e-discovery provider experienced in handling matters before these agencies will confirm that data is in the proper format.

In addition, e-discovery technology enables parties to efficiently and cost-effectively assess the breadth of an organization's data, identify responsive information and cull nonresponsive ESI, therefore reducing the cost and time required for review. Employing techniques such as keyword filtering, concept clustering, domain analysis and deduplication can significantly shrink the size of the potentially responsive data set. E-discovery companies can also use advanced technology to help counsel sample data sets in advance of meetings with an agency and thus provide compelling evidence that supports a reduction in the scope of review.

Fortunately, the agencies support many of these techniques to cull nonresponsive and redundant information. Sometimes, parties are allowed to deduplicate productions not only vertically, removing duplicates within a single custodian, but also to deduplicate horizontally, removing duplicates across multiple custodians. Reducing the amount of duplicates can significantly limit the number of documents requiring attorney review. With minimal time investment, these powerful tools can help substantially reduce the time and costs associated with responding to a second request.

Conclusion

Over the last decade, the DOJ and FTC have more aggressively sought the production of ESI in connection with mergers and acquisitions. The new premerger notification requirements and escalating use of second requests require parties to contemplate the best way to collect, review and produce ESI in the shortest possible timeframes. In these instances, it is our opinion at Applied Discovery that clear communication, project management and advanced technology will enable parties to quickly and effectively respond to these agencies' requests for information.

Rob Hellewell is an Attorney and Senior Director in the Washington, D.C. office of Applied Discovery, a division of LexisNexis. An experienced consultant, he counsels clients on a wide range of discovery matters and on cost-saving strategies in matters involving the collection, processing and review of large amounts of email and other electronic data. Mr. Hellewell also has extensive experience assisting clients with e-discovery issues in the antitrust and white collar area.He has advised clients in over 100 antitrust second requests, government investigations, litigations and other discovery matters.

Please email the author at rob.hellewell@applieddiscovery.com with questions about this article.