FTC Civil Investigative Demands in Merger Investigations: What to Expect

FTC Civil Investigative Demands in Merger Investigations: What to Expect

When the Federal Trade Commission (FTC) is investigating a proposed merger or acquisition, they often issue Civil Investigative Demands (CIDs) to obtain information and documents from the companies involved. CIDs are a critical part of the FTC’s merger review process, allowing them to gather the evidence needed to determine if a deal may be anticompetitive.

What is a CID?

A CID is essentially a subpoena that requires the recipient to provide the FTC with documentary material related to a law enforcement investigation [1]. This can include things like emails, financial statements, strategic plans, market studies, executive presentations, etc. Failure to comply with a CID can result in significant fines or other legal action.

Key Features of FTC CIDs

  • Issued under authority of the FTC Act
  • Seeks existing documents and information
  • Imposes continuous obligation to provide new materials
  • Has set time period for compliance
  • Legally enforceable in federal court

When are CIDs Issued in Mergers?

The FTC will typically issue CIDs during a merger investigation when they require additional information beyond what was provided in the initial Hart-Scott-Rodino (HSR) filing [2]. This often happens for complex deals that warrant an in-depth investigation. The CID compels the companies to produce documents, data, and other evidence that will help the FTC analyze the competitive impact of the transaction.

What to Expect if You Receive a CID

Carefully Review the Demand

CIDs specify what information and materials the company is required to provide, so it’s important to thoroughly review the demand. Get clarity from the FTC on any vague or confusing parts of the CID. You also want to make sure you understand the legal justification and scope of what is being investigated.

Meet with FTC Staff

The CID will provide the opportunity to meet and discuss it with FTC staff. Use this meeting to get a better sense of what they are looking for and why, resolve any ambiguities, and address feasibility concerns. Being transparent about challenges with compliance can lead to narrowing or extending deadlines.

Conduct Internal Search

Once the scope and requirements of the CID are clear, conduct a thorough search across the company for responsive documents and information. Identify key custodians and data sources. Implement appropriate holds to prevent deletion. Carefully review materials for privilege and confidentiality prior to production.

Produce Documents

Gather, organize and format the responsive materials for production to the FTC. Ensure they are complete, accessible and produced within the timeframe specified. Keep the FTC updated on progress and notify them if delays are expected.

Certify Compliance

An authorized company representative must certify that a diligent search was conducted and all relevant materials have been produced, to the best of their knowledge. This certification is made under penalty of perjury.

What Happens After Production?

After the FTC reviews the produced materials, they will determine if there is adequate information to make a decision on the merger or if additional CIDs are needed. If they believe the deal may be anticompetitive, they could:

  • Propose a consent decree with remedies to address concerns
  • Initiate litigation to block the transaction
  • Allow deal to proceed unchanged (unlikely if CID issued)

Throughout this process, companies should continue cooperating with FTC staff while also clearly conveying the procompetitive arguments for why their deal should be permitted.

Dealing with CIDs places significant demands on companies, but working constructively with skilled legal counsel can help navigate the process successfully. Let us know if we can assist with any FTC merger investigations or compliance matters.

In summary, FTC Civil Investigative Demands are a critical part of merger investigations, allowing the agency to compel production of evidence to determine if a deal may be anticompetitive. Companies that receive these subpoena-like information requests should carefully review them, meet with FTC staff, conduct a thorough internal search for responsive materials, certify their compliance, and continue cooperating with the investigation. Skilled legal counsel can help successfully navigate this complex process.