FTC and DOJ: Preserve Your Chats!

  • The Federal Trade Commission (FTC) and the US Department of Justice (DOJ) are updating their standard preservation notices and instructions for responding to all manner of discovery (e.g., second requests, voluntary access letters, compulsory process, etc.). The update will alert parties to the steps that must be taken to preserve communication from popular business collaboration tools and “ephemeral messaging platforms” like Slack, Microsoft Teams and Signal.
  • These platforms are typically set to delete communication data automatically and may lack appropriate capabilities for preserving and extracting data even when a preservation notice is issued. While these tools have become central features in the modern business landscape, the Agencies’ announcement is designed to clearly set out the expectation that companies and individuals will adhere to preservation requirements. Parties could be subject to criminal obstruction of justice charges if they fail to comply.
  • Highlighting the very serious concern these tools raise in the DOJ’s view, Manish Kumar, Deputy Assistant Attorney General for the DOJ’s Antitrust Division, asserted that ephemeral messaging platforms are “designed to hide evidence.”

WHAT HAPPENED

  • On January 26, 2024, the DOJ and FTC (the Agencies) announced an update to their preservation notices and instructions for responding to all manner of discovery to “address the increased use of collaboration tools and ephemeral messaging platforms in the modern workplace” and “reinforce longstanding obligations requiring companies to preserve materials during the pendency of government investigations and litigation.”
  • The Agencies recognize that ephemeral chat messaging is becoming an increasingly important feature of the modern business landscape, and they have sought to collect ephemeral messaging data in the past. However, because these platforms are typically set to delete messages automatically and may lack clear solutions for preserving data, the Agencies have run into dead ends trying to collect such data in prior cases. Indeed, Manish Kumar, Deputy Assistant Attorney General for the DOJ’s Antitrust Division stated that “these updates to our legal process will ensure that neither opposing counsel nor their clients can feign ignorance when their clients or companies choose to conduct business through ephemeral messages.”
  • This new preservation language will be included in all DOJ and FTC preservation letters, second request specifications, voluntary access letters, compulsory legal process and grand jury subpoenas going forward.
  • While the new language changes are a continuation of the Agencies’ existing preservation policies, they will highlight parties’ obligations with respect to ephemeral messaging data specifically, potentially making it easier for the Agencies to seek sanctions and other recourse against companies who fail to preserve such data.
  • Indeed, the Agencies’ announcement cites a prior case where civil spoliation sanctions resulted from a target’s failure to properly preserve ephemeral messaging data. Likewise, the FTC has also signaled its willingness to refer cases to the DOJ Antitrust Division’s Criminal Liaison Unit for criminal obstruction charges in certain cases.

WHAT THIS MEANS

  • The Agencies have recognized in recent cases that relevant business communications that used to happen over email are [...]

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FTC Announces Annual Merger Notification Threshold and Filing Fee Adjustments

On January 22, 2024, the Federal Trade Commission (FTC) announced increased jurisdictional thresholds, increased filing fee thresholds and filing fee amounts for merger notifications made pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).

Merger Notification Threshold Changes

The HSR Act compels transacting parties to notify the FTC and US Department of Justice (DOJ) of their intent to consummate a transaction if such a transaction meets or exceeds certain jurisdictional thresholds, barring an exemption. The adjusted thresholds apply to all transactions that close on or after the effective date, which will be 30 days after the notice is published in the Federal Register.

The FTC amends the merger notification jurisdictional thresholds on an annual basis based on changes in the gross national product (GNP).

  • The base statutory size-of-transaction threshold, the lowest threshold requiring notification, will increase to $119.5 million.
  • The upper statutory size-of-transaction test, requiring notification for all transactions that exceed the threshold (regardless of the size-of-person test being satisfied), will increase to $478 million.
  • The statutory size-of-person lower and upper thresholds (which apply to deals valued above $119.5 million but not above $478 million) will increase to $23.9 million and $239 million, respectively.

Merger Filing Fee Increases

Following the passage of the Merger Filing Fee Modernization Act, the FTC is required to revise filing fee thresholds and filing fee amounts each year. Filing fee threshold changes are based on the percentage change in GNP, and filing fee amounts are based on the percentage increase, if any, in the Consumer Price Index (CPI). As with the merger notification thresholds, the filing fee threshold and filing fee amount adjustments take effect 30 days after publication of the notice in the Federal Register.

The revised filing fee thresholds and filing fee amounts are provided in the table below.




Fourth Circuit Holds Per-Se Rule Does Not Apply in Bid-Rigging Case

WHAT HAPPENED

A three-judge panel from the US Court of Appeals for the Fourth Circuit overturned an executive’s bid-rigging antitrust conviction, holding that the district court erred in applying the per se standard to the executive’s alleged bid-rigging conduct.

The executive, Brent Brewbaker, rigged bids between his former employer, Contech, and its distributor, Pomona Pipe Products. The Fourth Circuit found that while Contech and Pomona both submitted competing bids for North Carolina Department of Transportation (NCDOT) projects, and Contech coordinated with Pomona to make Contech’s bids slightly higher priced, this conduct could not be deemed inherently unlawful under prior precedent because the entities had a manufacturer-distributor arrangement and were not simply direct competitors. In particular, the Fourth Circuit noted that manufacturer-distributor relationships such as the one between Contech and Pomona do not inherently lead to anticompetitive harm and may enhance competition.

Therefore, given the kind of relationship Contech and Pomona had, the Fourth Circuit held that the district court should have analyzed the conduct under the rule of reason to weigh the competitive implications of the parties’ agreement and conduct.

BACKGROUND

  • Contech manufactured and sold aluminum products.
  • Pomona distributed Contech’s aluminum products and was Contech’s exclusive dealer in North Carolina.
  • NCDOT used a bidding process for aluminum structure projects throughout the state. These projects required both the aluminum product and the services to install the aluminum structures.
  • Contech, Pomona and a third company were the consistent bidders for the NCDOT projects.
  • When either Contech or Pomona won a bid for a project, each would fulfill its contract using the other’s supply or services. Pomona, therefore, served as Contech’s “dealer” with Contech supplying Pomona the aluminum it needed to use in the projects Pomona eventually won; vice versa, Pomona provided necessary services to Contech when Contech won a bid. Neither Contech nor Pomona could win a bid without the products or services of the other.
  • In 2019, Brewbaker took charge of Contech’s bidding for these NCDOT projects and began intentionally submitting losing bids to enable Pomona to win by first asking for Pomona’s total bid price and then adding a markup to Contech’s bid price before submitting the bid to NCDOT.
  • DOJ alleged that Contech and Pomona engaged in bid rigging because they directly competed against each other’s separate bids. Brewbaker and Contech were indicted for violating Section 1 of the Sherman Act and conspiracy to commit mail and wire fraud.
  • Contech pleaded guilty to bid rigging and one fraud count.
  • Brewbaker proceeded to trial, and the district court convicted him of bid rigging and five other fraud-related counts (which were not overturned by the Fourth Circuit), upon concluding that Contech and Pomona’s conduct fell squarely within the definition of antitrust “bid rigging” under Section 1 of the Sherman Act.

HOW THE DECISION WAS REACHED

  • The Fourth Circuit explained that the rule of reason standard is the default framework used to scrutinize most business practices under the antitrust laws. It weighs [...]

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New FTC, DOJ Merger Guidelines Create Challenges and Opportunities

The US Federal Trade Commission (FTC) and US Department of Justice Antitrust Division (DOJ) issued their updated Merger Guidelines on December 18, 2023. These guidelines represent a significantly more enforcement-oriented approach than the prior guidelines, and they largely follow the contours of draft guidelines released in July 2023. Companies should be aware of the Merger Guidelines and their implications as they formulate strategies for assessing potential merger and acquisition options.

Read more here.




Antitrust M&A Snapshot | Q2 2023

Topics covered in this edition:

  • FTC Unveils Proposal Detailing Significant Changes to Hart-Scott-Rodino Act Merger Notifications
  • Assa Abloy Settlement Raises Questions on Litigating the Fix and DOJ Consent Decrees
  • Pharmaceutical Industry Remains in Regulators’ Crosshairs
  • “Whole of Government” Competition Mandate Can Impact Deals the FTC and DOJ Do Not Challenge
  • FTC’s Constitutionality Comes Under Fire—Again
  • Divergent Viewpoints in Video Games Sector: Microsoft’s Takeover of Activision Blizzard
  • New Merger Simplification Package from the EC

Access the full issue.




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