By William J. Minshall Jr. and David C. Shonka

New Five-Step Process Promotes a More Rigorous Second Request Compliance Process

On September 28, 2021, the Federal Trade Commission’s (“FTC”) Bureau of Competition adopted a new five-step process for investigating mergers and acquisitions.  The FTC has said that the new process is necessitated by the sharp increase in the number of transactions taking place that are reportable under the Hart-Scott-Rodino (“HSR Act”), the resulting strain on the FTC’s resources, and its concern that illegal transactions are not left uninvestigated or unchallenged.  The new five-step process includes changes that may require merging organizations to increase vigilance concerning document production, including integrating proactive approaches to information governance and the use of eDiscovery tools.

Background: The FTC is charged with investigating the competitive effects of mergers and acquisitions of a certain size under the HSR Act.  In 2010, there were 1,166 merger transactions reported to the FTC.  In 2018, there was a sharp contrast of 2,111 such transactions; and in just the first eight months of 2021, there were 2,436 transactions filed.  The FTC estimates the number will reach nearly 3,500 filings for the year.  Notably, the FTC’s resources have not kept pace with the increase in the number of transactions it is charged with investigating.

Key Changes to the Second Requests: The FTC has announced five important changes in its merger review process for reportable transactions:

  • More Comprehensive and Analytically Rigorous Reviews: The FTC plans to give heightened scrutiny “to a broader range of relevant market realities,” including the competitive effects on labor markets, cross-market effects, and the effects that investment firms may have on market incentives to compete.
  • Limited Modifications: The FTC will “only consider requests for modifications” after companies comply with various high-level information requests.  These include identification and description of employees’ business responsibilities, including those involved in the transaction and the merging parties maintaining their data.
  • eDiscovery Tool Identification: The FTC will align its requirements for the use of eDiscovery tools more closely with the Antitrust Division’s requirements, and companies responding to Second Requests will be expected to provide information about how they are going to use eDiscovery tools to find responsive documents before they use them.
  • Privilege Logs: The FTC is discontinuing the option to submit a “partial privilege log” which was previously allowed.
  • Commissioner Access and Security: The FTC will allow second requests to be accessible to the full commission by uploading the data it receives into a secure internal system.

Timeframe: The revisions are now in effect and apply to all future Second Requests.

Looking Ahead: Given the heightened scrutiny the Agency is giving the “market realities” in mergers, including matters relating to labor market effects, cross-market effects, and the effects that investment firms have on market incentives to compete, compliance with Second Requests is likely to become more, not less, complicated.  Merging firms should therefore consider taking some early actions with respect to their document productions:

  • Make sure their records or information management systems and processes are in good order before finalizing their merger plans.  Taking this step will allow the firms to more readily identify, locate, access, and retrieve records that are in good shape and can be produced when needed.
  • Have on hand a legal team of proven eDiscovery experts who know and understand technology assisted review (“TAR”) processes, can explain their protocols, provide requested information about their operations, and ultimately make defensible and timely productions of responsive records.
  • Have accessible a supporting legal team that understands the intricacies of cross-border data transfers in matters seeking records located outside the United States; and who also understand the nuances of both U.S. and foreign privilege law and know the benefits and limitations of applying TAR processes to the identification, review, and logging of privileged materials.

As noted, companies face new requirements for complying with Second Requests.  Before finalizing merger or acquisition plans, companies should prepare to respond fully and accurately to substantial demands for information from either the FTC  or the Department of Justice (“DOJ”), and potential demands from State agencies and even foreign governments.

For additional information on this topic, please contact David Shonka at