Author: Steven J. Cernak
It happens all the time. You read about a merger in your industry, maybe between two suppliers or competitors. If the merger involves suppliers, maybe your sales rep makes a courtesy call. You then get back to your business, preparing to adjust as necessary. A short time later, you get a call. Some attorney from the Federal Trade Commission or Department of Justice Antitrust Division is “conducting a non-public investigation” in your industry and you deduce that it is about the merger. Is this normal? What can — or should — you do next?
Relax. That attorney most likely is just doing her job as part of the Hart-Scott-Rodino merger review process. She is asking you to play a role in that process. Most times, your role will be small as you act as a good corporate citizen and, perhaps, learn something about what is going on in your industry. Still, you will want to seek assistance and take the right steps to ensure that your actions do not distract you from your daily business.
To determine if a merger is good or bad for competition, the FTC and DOJ need information about the merging parties and the relevant industries. For most large mergers, they gather that information through the Hart-Scott-Rodino (HSR) process.
HSR requires the parties to submit certain information and documents and then wait for approval before closing the transaction. The FTC and DOJ then have 30 days to determine if they will allow the merger to proceed or seek much more detail through a “second request” for information. A second request can take months, often over a year, to play out. If the agency still has competition concerns at the end of the process, it can sue to block the merger.
Throughout the process, the reviewing agency will reach out to third parties — suppliers, experts, and, especially, customers — for relevant information to help the agency predict the potential effect of the proposed merger on competition. That is where you come in.
Immediate Next Steps
After you get that call from the reviewing agency, it is a good idea to get with your friendly, neighborhood antitrust attorney. That attorney can guide you through the process, saving you time in dealing with the agency attorney and helping you understand the specialized language of merger review. (While covering hundreds of these matters in-house at General Motors, I often said that my role was to use my “automotive to antitrust” decoder ring for the good of both sides.)
At this point in the process, responding substantively to the agency call is voluntary; however, both the FTC and DOJ have processes that they can tap to compel cooperation if they think your information is key to their investigation. As you will see below, cooperating with the request usually is not too burdensome and can be the better long-term decision.
If it is not obvious from the initial request, you should obtain assurances that this really is a third-party request and you are not the subject of the investigation. Because HSR filings are confidential, the agency might not be able to explicitly confirm that they are investigating the merger; however, they can confirm if you are a subject of the investigation or merely a witness.
Then, you should do a quick check with the right people in your organization to ensure that there is no reason why the investigation might suddenly turn on you. Did you recently try and fail to negotiate a merger with one of the companies? Did you just finish some acrimonious negotiations where one of the companies accused you of acting anticompetitively?
With those assurances in place, you can then confirm with the agency attorney that she just wants to arrange one of the usual informal phone calls with the right person from your company to discuss the usual subjects. Plenty to unpack in that prior sentence, let’s do it in reverse order.
Usually, the agency attorney will want to obtain basic information about the merging parties, their competitors, and some trends in the industry. If it is your suppliers who are merging, for instance, she will want to know who you buy from, which other companies are on the bid list, and why you made the decisions you did. Sometimes, the agency will be focused on just a subset of those issues, like the technical differences between the products offered by the merging companies.
So the right person is the one in your company who can best answer those questions, usually with very little extra preparation. For mergers of suppliers, that person often is the right purchasing employee. If the questions will be more technical, perhaps an engineer or IT professional will be best. You can have more than one speaker but you will then need to make sure that they do not contradict one another and it is clear which one is speaking for each answer.
The phone call is usually arranged in the next few days; after all, the agency might still be gathering information within that initial 30-day waiting period. The call usually lasts anywhere from thirty to sixty minutes. They are not recorded, although the attorney will take notes, and the speakers are not under oath. As a result, the calls end up more like conversations than depositions.
During and After the Call
On the call, you need to remember that you are there to answer the questions that the agency attorney (often plus an economist) finds interesting, not tell everything you know about the industry. Still, unlike a deposition, it is fine to be a little more expansive in your answers to ensure that she understands your responses. While you may have notes or other documents to assist you in answering, be aware that referring to them might tempt the attorney to ask for copies.
If you do not know the answer to a question, that is fine. Just tell the attorney. If you can provide some helpful information and explain your confidence, or lack thereof, in it, however, you can provide some speculation. Just make sure the listener understands.
In most cases, the end of the call also marks the end of your role in the investigation. Sometimes, a follow-up call is necessary to confirm a few key points; however, those questions usually can be handled indirectly through your attorney. If data are important to the investigation, the agency might ask for documents containing information discussed during the call.
All the information provided to the agency, either during the call or in documents, is kept confidential and not shared with the parties. If the agency decides to challenge the merger and the parties decide to fight that challenge, however, you might be asked by the agency to provide a sworn statement or even be a witness in any court proceeding. The merging parties might make the same requests. In those very rare circumstances, you will be glad to have had your antitrust attorney at your side throughout the process to help guide you through those much more difficult proceedings — but those details are beyond the scope of this post.
In nearly all cases, the result will be a simple, single call where you can share your knowledge of the industry and help the FTC and DOJ protection competition. This is one call from the government that you usually do not need to fear.