NATIONALLY RECOGNIZED FEDERAL LAWYERS
Last Updated on: 16th September 2023, 09:39 pm
Asserting Privilege to Block FTC Discovery Requests
When the Federal Trade Commission conducts an investigation into potential anticompetitive practices, it often issues civil investigative demands (CIDs) requiring companies to provide documents and information. Companies frequently try to avoid complying with broad CID requests by asserting attorney-client privilege or work product protection over certain materials. However, the FTC has established rules and procedures companies must follow to properly assert privilege and withhold documents. This article examines the requirements for asserting privilege against FTC discovery requests, common pitfalls to avoid, and strategies companies can use to protect sensitive information.
FTC’s Rules on Privilege Logs
To assert privilege over materials responsive to an FTC CID, companies must provide a privilege log identifying each document withheld and the specific privilege claimed. The FTC’s Model Second Request lays out detailed requirements for privilege logs, stating they must describe each document’s general subject matter, date, author, recipient, and the basis for withholding it. Companies have the option of providing either a “Complete Log” covering all privileged materials at once, or a “Partial Log” covering only a subset of custodians, followed by additional logs until all materials are logged. However, companies cannot certify full compliance with the CID until all privileged documents are logged.
The FTC cautions that parties cannot certify substantial compliance based on a Partial Log alone. The FTC may challenge claims of privilege if logs lack sufficient detail, or request a Complete Log if the Partial Log omits key custodians. Thus while Partial Logs may buy time, companies still need to provide a Complete Log before the FTC will deem CID compliance complete.
Common Pitfalls When Asserting Privilege
Parties asserting privilege often run into problems by failing to follow the FTC’s requirements, resulting in privilege claims being overruled. Common mistakes include:
- Submitting inadequate privilege logs with vague, boilerplate descriptions that lack necessary details about each document.
- Omitting key custodians from Partial Logs, prompting the FTC to demand Complete Logs.
- Making blanket privilege assertions without logging individual documents.
- Delaying privilege logs until late in the investigation, risking a motion to compel.
- Failing to describe redactions made to produced documents due to privilege.
For example, in McWane, the FTC moved to exclude all of the company’s advice-of-counsel defenses because McWane relied on privileged advice but failed to provide adequate logs allowing the FTC to test and rebut the defenses. The FTC argued McWane could not “hide behind privilege while affirmatively relying on privileged documents.”
Parties must take care to avoid these pitfalls by working closely with counsel to prepare timely, detailed privilege logs that comply with all FTC requirements. Boilerplate logs are likely to fail under scrutiny.
Strategies for Protecting Privileged Materials
While privilege logs are required, companies being investigated can take proactive steps to minimize disclosure of sensitive materials to the FTC:
- Carefully review CID instructions upfront and begin preparing privilege logs early.
- Limit written legal advice and mark communications “Attorney-Client Privileged” when appropriate.
- Segregate privileged documents to simplify logging process.
- Consider Partial Logs for key custodians to manage privilege review burden.
- Meet and confer with FTC staff about privilege log expectations.
- Get counsel input on redactions to maximize privilege protections.
Particularly for broad FTC investigations involving substantial data, companies should use advanced analytical tools and AI to efficiently identify privileged materials at scale. New technologies can accelerate privilege reviews and log creation to help avoid pitfalls.
Challenging FTC Demands for Privileged Information
If the FTC challenges a claim of privilege or presses for logs covering thousands of documents, companies can push back by filing a motion for a protective order. Motions should outline the burden involved and demonstrate that privilege assertions are justified. The FTC must then show “substantial need” for privileged materials to overcome protections.
For example, in Axon Enterprise, when the FTC sought a Complete Log encompassing over 1,500 attorney-client documents, Axon objected through a motion to compel. Axon argued the “extremely broad” request imposed undue burden outweighing any benefit. The court agreed, limiting required logging to a smaller subset of documents.
Companies should be prepared to litigate privilege issues through motions practice if negotiations with the FTC reach an impasse. However, courts expect parties to meet and confer in good faith before resorting to motions.
Waiving Privilege Through Voluntary Disclosures
Parties must also take care not to inadvertently waive privilege through their own actions. Voluntarily disclosing privileged communications to third parties, even the FTC, can waive privilege under the “selective waiver” doctrine. In Chevron, Chevron argued its voluntary disclosure of privileged documents did not waive privilege because it shared them solely for settlement purposes. However, the court held Chevron waived privilege by voluntarily producing documents to the FTC without a confidentiality agreement.
Similarly, in GT Nexus, the FTC General Counsel voluntarily disclosed privileged information to the Commission in an effort to expedite the investigation. The court ruled this destroyed privilege despite intentions, because information was shared outside the attorney-client relationship.
Thus disclosing privileged documents to the FTC outside formal discovery procedures risks privilege waiver even if done cooperatively. Companies must maintain consistent privilege assertions and not allow extra-procedural releases.
Navigating FTC vs. DOJ Jurisdiction Over Mergers
When reviewing mergers, the FTC and Department of Justice (DOJ) Antitrust Division have overlapping authority. Though the agencies aim to coordinate, complex deals may trigger scrutiny from both. Companies must strategize for handling dual investigations.
Typically, the FTC and DOJ allocate merger reviews based on industry expertise. The FTC often takes the lead in sectors like healthcare, retail, consumer goods and technology. The DOJ commonly handles aerospace, agriculture, financial services, telecom and transportation deals.
However, major transactions sometimes draw interest from both agencies. For example, the DOJ and FTC both investigated mergers like AT&T/Time Warner, CVS/Aetna, and Halliburton/Baker Hughes before the FTC ultimately challenged them in court. Handling parallel probes requires coordination between company counsel and the agencies.
The FTC-DOJ Merger Review Protocol facilitates cooperation in dual investigations to minimize duplicative demands. Parties can designate a lead agency to manage joint interviews and document production. However, both agencies remain free to issue independent Second Requests and reach their own conclusions.
If the DOJ and FTC disagree on an outcome, clearance from one does not preclude the other from challenging the deal. Thus the risk of extended reviews and potential litigation increases with dual investigations, heightening the need for an advocacy strategy directed at both enforcers.
Leveraging State Attorneys General in FTC Merger Reviews
States often join FTC merger challenges under their own antitrust laws, adding resources but also complexity. The FTC attempts to coordinate state involvement through its Model Second Request Protocol.
The Protocol allows merging parties to share confidential materials with state attorneys general (AGs) if states agree to confidentiality protections. While voluntary, cooperation can streamline reviews by avoiding duplicative state subpoenas.
However, AGs make independent enforcement decisions and have sued to block mergers even where federal regulators cleared the deals. For example, multiple states sued alongside the FTC to stop the Staples/Office Depot and DraftKings/FanDuel mergers despite FTC approval.
Parties under FTC investigation should strategize for potential state AG participation early on. Multi-state opposition can influence FTC merger challenges, so engaging AGs proactively is key.
Role of Private Antitrust Suits in FTC Enforcement
Private antitrust litigation frequently follows on the heels of FTC enforcement actions. Private suits provide another means for competitors and consumers to challenge anti-competitive conduct already targeted by the FTC.
Plaintiffs often gain access to evidence uncovered in FTC investigations to support private claims. For example, after the FTC sued Qualcomm for monopolistic patent licensing practices, consumer class actions relied on the FTC’s theory of harm in subsequent suits against Qualcomm.
Private suits similarly amplified the impact of the FTC’s enforcement action against Intel for anticompetitive tactics aimed at AMD. AMD later extracted a $1.25 billion settlement from Intel in private litigation asserting the same core allegations.
Thus FTC enforcement can lay groundwork for follow-on private antitrust cases seeking substantial damages. Parties under FTC investigation should anticipate heightened private litigation risks and manage disclosures accordingly.
Responding to International Merger Reviews Alongside FTC
Global deals often trigger merger reviews by multiple international agencies in addition to the FTC. Key jurisdictions like the EU require separate filings on similar timeframes as the FTC’s process.
Under the International Antitrust Enforcement Assistance Act, the FTC can exchange confidential case information with foreign counterparts to coordinate reviews. Companies too can enter waivers allowing the FTC to share materials.
While cooperation reduces duplicative demands on parties, international enforcers make independent determinations under their own standards. FTC clearance may not preclude challenges in the EU or China where authorities reach different conclusions.
Skilled advocacy is essential across jurisdictions to navigate multinational reviews. Arguments and commitments that persuade the FTC may differ from those needed to obtain unconditional approvals globally.
FTC merger investigations increasingly intersect with other enforcement authorities domestically and worldwide. Managing parallel reviews requires strategic coordination across agencies to streamline the process and shape consistent outcomes. With vigilance and early preparation, parties can guide multifaceted investigations toward successful resolutions.