1. [NAME OF PRESENTER] [TITLE OF PRESENTER]
Antitrust Tips for Document Creation in Mergers: Presentation Materials
[DATE]
[NAME OF PRESENTER]
[TITLE OF PRESENTER]

2. The Merger Review Process
Under the Hart-Scott-Rodino (HSR) Act, the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) have the ability to review the competitive effects of certain mergers and acquisitions before closing if they meet certain size thresholds.
Merging parties in a reportable transaction cannot close until the HSR waiting period expires or is terminated. The waiting period is generally 30 calendar days.

3. The Merger Review Process: Second Requests
If at the end of the waiting period, the agencies have substantive concerns, they issue a request for additional information and documents, known as a Second Request. A Second Request:
Is a massive request for documents and data, and requires detailed responses to interrogatories.
Extends the HSR waiting period until 30 days after both parties substantially comply.
The agencies also have the ability to undo a transaction that has gotten HSR clearance and to review mergers that are not reported under the HSR Act.

4. Tips for Document Creation
Assume that all transaction-related documents will be read by an antitrust agency during merger review, including:
s and attachments.
Hard or soft copy memoranda.
PowerPoint presentations.
Spreadsheets.
Handwritten documents, including notebooks and handwritten notes in the margins of documents.

5. Tips for Document Creation (cont’d)
The deal team must be especially careful in what they say about the transaction in documents since deal-related documents may be submitted in response to:
Item 4(c) and 4(d) of the HSR filing.
A voluntary request for documents during the initial 30-day review.
A Second Request.

6. Document Creation Guidance
The FTC and the DOJ place considerable weight on what the contemporaneous records of the deal team and company executives say or do not say about important issues such as:
The business rationale for the transaction.
Expected synergies.
Competition, including the competitiveness of particular firms.
Market shares.
Barriers to entry.
Ability to raise prices.
Likely customer reaction.
Other information relating to the transaction and competition, such how the transaction might lead to efficiencies or the parties' ability to create new products.

7. Hot Documents and Their Consequences
The antitrust agencies seek out documents that raise red flags about the competitive effects of the transaction. These types of documents, known as bad or hot documents, generally contain statements that the transacting parties:
Intend to:
Raise prices.
Reduce output, quality, services, or innovation.
Otherwise limit competition.
Are significantly close competitors.
Lack meaningful competition.

8. Dos and Don'ts of Document Creation
Avoid statements:
About high market shares, lack of competition in the market, or high barriers to entry.
That a transaction will eliminate a competitor or result in higher prices or less competition.
Limit the distribution of any written communication on a need- to-know basis.

9. Dos and Don'ts of Document Creation (cont’d)
Emphasize the real objectives of the transaction, such as:
Increased efficiencies.
Prospects for enhanced competitiveness.
Benefits to customers.
Before a document is finalized or reviewed by corporate officers or directors, provide it to counsel with a note marked "Privileged and Confidential" to seek legal review.

10. Dos and Don'ts of Document Creation (cont’d)
Write about . . .
Instead of writing about . . .
Lower costs, efficiencies
Higher prices
A large or sizable business
High or dominant market shares
Benefit to consumers
Harm to competitors
Synergies, efficiencies
Leverage
Improving competitiveness
Eliminating competition or competitors
Staying ahead of competition
Market control
Price competition
Pricing stability, price leadership
New business opportunities
Defensive actions
Reasonable prices, value
Price premiums
Business, niche, channel, line, area, region, marketplace
A defined market
Share of revenues, business
Market share
Competitiveness, lower costs
High or higher entry barriers
The competition
Individual competitors
Formidable competitors
Unfair or cutthroat competition
Aggressive price-cutting
Irresponsible pricing
What you know
Rumor, speculation, what you think you know

11. Premerger Challenges Involving Hot Documents
Problematic language in documents can hurt deals by drawing increased scrutiny to the transaction.
These types of statements in ordinary course of business documents can also be difficult to explain away because they provide the parties' own view of their current position in the market and the effects of the transaction on competition.

12. Premerger Challenges Involving Hot Documents: Example 1
Parties
Outcome
Problematic Language
Anthem, Inc./Cigna Corp.
DOJ obtained injunction in federal court.
Anthem’s market share is “dominant in most of [its] markets,” a position that gives it “a clear advantage and provides opportunities to drive margin growth.”
In October 2014, Cigna’s CFO warned the CEO to stop using words like “dominant” and “market share” when analyzing the potential deal because they are “both sensitive words from a post-deal review perspective.”

13. Premerger Challenges Involving Hot Documents: Example 2
Parties
Outcome
Problematic Language
Halliburton Co./Baker Hughes Inc.
Abandoned transaction after DOJ filed lawsuit.
“[W]e have both agreed that a combination of Halliburton and Baker Hughes will raise significant issues under the antitrust laws of the United States and other jurisdictions [I]t remains unclear whether there are workable solutions that appropriately address the antitrust risk and the completion risk.”

14. Premerger Challenges Involving Hot Documents: Example 3
Parties
Outcome
Problematic Language
Staples, Inc./Office Depot, Inc.
FTC won case; the parties abandoned the deal.
“There are only two real choices for customers:” Staples and Office Depot. Office Depot similarly made clear to a customer that “[o]n a national scale, Office Depot’s competition is Staples.”
While encouraging a large B-to-B customer to accept its “best and final” offer promptly, Office Depot stated, “[i]f and when [Staples’] purchase of Office Depot is approved, Staples will have no reason to make this offer.”
“[The merger] will remove your ability to evaluate your program with two competitors. There will be only one.”

15. Premerger Challenges Involving Hot Documents: Example 4
Parties
Outcome
Problematic Language
Whole Foods/
Wild Oats
FTC won case: Whole Foods agreed to divest 32 stores.
By buying Wild Oats, Whole Foods "would …eliminate forever the possibility of Kroger, Super Value, or Safeway using their brand equity to launch a competing national natural/organic food chain to rival us …"
"Wild Oats may not be able to defeat us but they can still hurt us …"
"Wild Oats is the only existing company that has the brand and number of stores to be a meaningful springboard for another player to get into this space. Eliminating them means eliminating this threat forever, or almost forever."

16. Premerger Challenges Involving Hot Documents: Example 5
Parties
Outcome
Problematic Language
National CineMedia/
Screenvision
Abandoned transaction after DOJ filed lawsuit.
National CineMedia's CEO refused to follow Screenvision "down the pricing death spiral."
National CineMedia needed "to buy Screenvision before either us or Screenvision does a stupid deal with the exhibitor."
National CineMedia identified two ways to cope with Screenvision's competitive tactics. "Plan A" was to acquire Screenvision and "Plan B" was to compete with it. National CineMedia opted for the former.

17. Post-Consummation Challenge Involving Hot Documents: Example 6
Parties
Outcome
Problematic Language
Bazaarvoice/
Power Reviews
DOJ won case: Bazaarvoice required to divest Power Reviews business.
Acquiring PowerReviews would "eliminate Bazaarvoice’s primary competitor" and "provide relief from price erosion."
Customers would be unable to switch to other competitors because the alternatives were "scarce" and "low-quality."
The acquisition would "block entry by competitors" and "ensure Bazaarvoice's retail business was protected from direct competition and premature price erosion."

18. Questions

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