1. Finding and Evaluating Antitrust Complaints
2. Recommending a Preliminary Inquiry
   1. Standards for Approval a Preliminary Inquiry
   2. Making a Request for Preliminary Inquiry Authority
   3. FTC Clearance Procedure
   4. Referral of a Matter to Another Prosecutorial Agency
3. Conducting the Preliminary Inquiry
   1. Planning the Investigation
   2. Obtaining Assistance from Federal Agencies
      1. Federal Bureau of Investigation
      2. Other Federal Agencies
   3. Obtaining Information by Voluntary Requests
      1. Considerations In Using Voluntary Information Requests
      2. Confidentiality Considerations
   4. Status Reports on Investigations
   5. Standards for Determining Whether to Proceed By Civil or Criminal Investigation
   6. Evaluating the Results of a Preliminary Inquiry
   7. Closing an Investigation
4. Conducting a Merger Investigation
   1. A Basic Guide to the Premerger Notification Statute and Rules
      1. Determining Whether the Act Applies
         1. Tests
         2. Definitions
         3. Calculating the Thresholds
         4. Special Types of Transactions
      2. Exemptions to the Reporting Requirements
      3. Filing Mechanics
      4. Waiting Period
      5. Early Termination of the Waiting Period
      6. Request For Additional Information
      7. Other Provisions of the Act and the Rules
         1. Preliminary Injunction; Hearings
         2. Enforcement of the Act
         3. Confidentiality of HSR Materials
         4. Relationship of Premerger Notification to Other Statutes
   2. Reviewing Premerger Filings
      1. Procedures For Getting Premerger Filings to the Staff for Review
      2. Substantive Review of the Filing
         1. Contents of the Form
         2. Other Sources of Information
      3. Assessing the Completeness of the Filing
      4. Recommendation to Open or Not Open an Investigation
         1. The No-Interest Memorandum
         2. Opening a Preliminary Inquiry
      5. Clearance Procedure
      6. Preclearance Contracts with the Parties
      7. Maintaining the Filings
   3. Merger Investigation Overview
      1. The Preliminary Inquiry
      2. Second Request Authority
         1. Model Second Request
         2. The Second Request Letter
         3. Negotiating Modification
         4. Compliance with the Second Request
      3. After the Second Request Is Issued
      4. After the Parties Are in Substantial Compliance
      5. Procedures for Recommending Suit
5. Issuing Civil Investigative Demands
   1. Function of Civil Investigative Demands
      1. Where CIDs Can Be Used
      2. Criminal Investigations
      3. Other Matters Wherein CID Use Is not Authorized
      4. Basic Characteristics of CIDs
   2. Legislative History of the Antitrust Civil Process Act and Amendments
      1. 1962 Act
      2. 1976 Amendments
      3. 1980 Amendments
      4. 1994 Amendments
   3. Types of Civil Investigative Demands
      1. CIDs for Documentary Material
         1. Description
         2. Originals and Copies
         3. Products of Discovery
         4. Time Allowed for Production
         5. Manner of Production
         6. Offer to Discuss Problems Raised by CID with Recipients
      2. CIDs for Written Interrogatories
      3. CIDs for Oral Testimony
         1. Notice
         2. Location and Procedure for Taking Testimony
         3. Right to Counsel, Objections, Privilege
         4. Immunity
         5. Witness's Review and Signature of Transcript
         6. Witness's Right to a Copy of Transcript
   4. Procedures for Issuing CIDs
   5. Service of CIDs
      1. Service on Domestic Respondents
      2. Service on Respondents Situated Abroad
      3. Proof of Service
   6. Confidentiality and Permitted Uses of CID Materials
      1. DOJ Use and Outside Disclosure of CID Materials Authorized by ACPA
      2. Division Policy and Practice Concerning Requests for Additional Limitations on Use or Disclosure of CID Material
         1. General Policies
         2. Disclosure to Congress
         3. Disclosure to the Federal Trade Commission
         4. Disclosure in the Context of a CID Deposition
         5. Disclosure in Judicial or Administrative Proceedings
            1. Agreements Concerning Notice
            2. Protective Orders During the Investigatory Stage
            3. Discovery/Protective Orders During Proceedings
   7. CID Custodians and Deputy Custodians
   8. Grounds for Objection and Judicial Proceedings Concerning CIDs
      1. General Standards - both Grand Jury and Civil Discovery Standards Apply
      2. Objections Based on Procedural Requirements of the Act
      3. Objections Based on the Government's Motives
      4. Objections Based on Jurisdictional Grounds
      5. Objections Based on Pre-existing Protective Orders
      6. Miscellaneous Objections
      7. Judicial Proceedings to Enforce or Quash CIDs
      8. Discovery By CID Recipient Against the Division
      9. Appellate Review and Remedy Provisions
   9. Return of CID Materials at End of Investigation
   10. Criminal Penalties
6. Conducting a Grand Jury Investigation
   1. Requesting A Grand Jury Investigation
   2. Empaneling and Scheduling the Grand Jury
   3. Impounding Orders and Rule 6(e)(3)(B) Notices
   4. Issuing Grand Jury Subpoenas
      1. Subpoenas Duces Tecum
      2. Subpoenas Ad Testificandum
      3. Subpoenas for Exemplars
   5. Search Warrants
   6. Checklist of Procedures for a Grand Jury Session
   7. Requests For Statutory Immunity
      1. Division Procedures for Processing Requests for Statutory Immunity
      2. Division Standards for Seeking Immunity Authorization
   8. Informal Immunity
   9. Corporate and Individual Leniency
      1. Criteria for Corporate Leniency
         1. Leniency Before an Investigation Has Begun
         2. Alternative Requirements for Leniency
         3. Leniency for Corporate Directors, Officers, and Employees
      2. Criteria for Individual Leniency
      3. Procedure for Conferring Amnesty
   10. Requesting Internal Revenue Service Information During a Grand Jury Investigation
   11. 1Notification or Approval Procedures in Certain Types of Investigations
       1. Notice of Subjects of Sensitive Criminal Investigations
       2. Approval of Subpoenas to and Indictment of Members of the News Media and News Organizations
       3. Issuance of Subpoenas to Attorneys For Information Relating to the Representation of Clients
       4. Notification of Matters Involving Foreign Government Interests
   12. 1Investigating Related Criminal Activity
       1. Circumstances in Which the Division Investigates Related Criminal Activity
       2. Procedures for Obtaining Criminal Division Clearance and Assistance
7. Completing the Investigation and Recommending Civil or Criminal Suit
   1. Preparing to Recommend a Case
      1. Consultation With Antitrust Division Economists
      2. Notification to Prospective Defendants
      3. Dual Enforcement Policy ("Petite" Policy)
   2. Case Recommendation Procedures
      1. Recommending a Non-Merger Civil Action
      2. Recommending Merger Cases
      3. Recommending a Criminal Case
         1. Recommending an Indictment
            1. Table of Contents
            2. Summary of Offense
            3. Proposed Defendants
            4. Order of Proof/Summary of the Evidence
            5. Summary of the Evidence Against Each Proposed Defendant
            6. Persons and Companies Not Recommended for Indictment
            7. Weaknesses and Defenses
            8. Arguments of Counsel and Staff Responses
               1. Victims of the Violation and Staff Compliance with the Victim and Witness Protection Act of 1982 and Related Statutes
               2. Recommending a Plea Agreement
   3. Procedures for Review of Case Recommendations
8. Other Investigative Functions
   1. Business Review Procedures
      1. Origin and Development of Procedures
      2. Purpose
      3. Manner of Request
      4. Processing the Request
      5. Timing of Investigation
      6. Investigating a Business Review
      7. Review Procedures
      8. Judicial Interpretation and Review
   2. National Cooperative Research and Product Act of 1993
   3. Export Trade Certificates
      1. Overview of the ETC Act
      2. Initial Processing of an Application
      3. Requests for Supplemental Information
         1. Informal Requests
         2. Formal Requests
         3. CIDs
      4. Confidentiality of Information
      5. Analysis of the Application
      6. Recommendation and Review
      7. Decision by the Assistant Attorney General
      8. ETC Notebook
   4. Judgment Monitoring, the JEMIS System and Judgment Enforcement
      1. Judgment Monitoring
      2. JEMIS and Reporting Requirements
      3. Judgment Enforcement
   5. Judgment Modifications and Terminations
      1. Phase One--Obtaining Approval to Consent to Modification or Termination
         1. Initiation of the Process
         2. Recommendation, Review and Applicable Standards
      2. Phase Two--Procedures for Termination or Modification
         1. Necessary Papers
         2. Notice, Publication Costs and Multiple Defendants
         3. Review, Filing and Other Procedural Aspects

This Chapter sets forth the manner in which the Antitrust Division usually conducts its investigations and the procedural steps that ordinarily are followed during an investigation. This Chapter will assist attorneys and economists in initiating and conducting an investigation, both factually and legally, and in deciding whether to recommend prosecution.

The Chapter also describes various other Division responsibilities including Business Reviews, Export Trade Certificates, judgment terminations, and the premerger notification procedures of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

A. Finding and Evaluating Antitrust Complaints

The Antitrust Division's investigations arise from a variety of sources including:

1. complaints received from citizens and businesses when they believe that companies or individuals are engaged in unlawful conduct;

2. analysis and evaluation of filings under the premerger notification provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976;

3. press reports of various practices that come to the Division's attention through the monitoring of newspapers, journals, and the trade press;

4. "inside" information obtained from informants, or individuals or corporations applying for amnesty;

5. complaints and information received from other government departments or agencies;

6. complaints and referrals received from United States Attorneys and state attorneys general;

7. analysis of particular industry conditions by Division attorneys and economists, including systematic industry screenings;⁽¹⁾ and

8. monitoring of private antitrust litigation to determine whether the Division should investigate the matter.

The assignment of specific responsibilities to each of the sections, task forces, and field offices assists in the uncovering of suspected violations. Each section, task force, and field office is responsible for identifying violations within its area of responsibility. In addition, general complaints received by the Front Office are referred to a section, task force, or field office, as appropriate.

The attorney, economist or paralegal who receives a complaint should develop information from the complainant, from trade publications and other public sources, and from governmental entities. See infra Chapter VI, Section B. Except under unusual circumstances that require the approval of the appropriate Director of Enforcement, the attorney, economist or paralegal must not communicate with other individuals within the industry, or individuals and corporations that may be implicated in the alleged violation for three reasons. First, the Division does not begin a formal investigation until a policy and factual determination has been made that an investigation should proceed and the Division's resources should be committed. Second, the Division and the Federal Trade Commission clear proposed investigations with each other before they are opened. The purpose of this clearance procedure is to ensure that both agencies are not investigating the same conduct and to avoid burdening the parties under investigation and potential witnesses with duplicative requests. See infra Section B.3; Chapter VII, Section A. Third, contact may prematurely tip-off the subject of the investigation that an inquiry has been or may be initiated.

B. Recommending a Preliminary Inquiry

1. Standards for Approving a Preliminary Inquiry

Generally, a preliminary inquiry ("PI") will be authorized by the Antitrust Division if (a) there are sufficient indications of evidence of an antitrust violation; (b) the amount of commerce affected is substantial; (c) the investigation will not needlessly duplicate or interfere with other efforts of the Division, the Federal Trade Commission, a United States Attorney, or a state Attorney General; and (d) resources are available to devote to the investigation. Although an investigation does not formally become "civil" or "criminal" until compulsory process in the form of CIDs, Second Requests, or grand jury subpoenas is issued, a preliminary judgment is usually made when the PI request is submitted as to whether the investigation will be pursued as a civil or criminal matter. Generally, the type of conduct will govern the civil/criminal determination (e.g., merger matters are pursued civilly, per se price fixing is pursued criminally). See infra Section C.6 (discussing standards for determining whether to proceed by civil or criminal investigation). Among other things, the civil/criminal decision will determine which Director of Enforcement will supervise the matter.

In a civil matter, from the outset, attention should be given to the legal theory, relevant economic learning, the strength of likely defenses, any policy implications and the potential doctrinal significance of the matter. The greater the potential significance of the matter, the more likely it is that the request will be approved.

In a matter where the suspected conduct appears to meet the Division's standard for a criminal proceeding, see infra Section C.6, the decision whether to open an investigation will depend on three questions. The first of these is whether the allegations or suspicions of a criminal violation are sufficiently credible or plausible to call for a criminal investigation. This is a matter of prosecutorial discretion and is based on the experience of the approving officials; there is no legal standard. The second question is whether the matter is "significant." Determining which matters are "significant" is a flexible, matter-by-matter analysis that involves consideration of a number of factors, including: volume of commerce affected; geographic area impacted (including whether the matter is international); the potential for expansion of the investigation or prosecution from a particular geographic area and industry to an investigation or prosecution in other areas or industries; the deterrent impact and visibility of the investigation and/or prosecution; the degree of culpability of conspirators (e.g., the duration of the conspiracy, the amount of overcharge, any acts of coercion or discipline of cheaters, etc.); and whether the scheme involved a fraud on the federal government. Because the Division's mission requires it to seek redress for any criminal antitrust conspiracy that victimizes the federal government and, therefore, injures American taxpayers, this last factor can potentially trump all of the others. The third question--what resources will be required to investigate and prosecute the matter--is asked only for matters that are assessed as having lesser significance; the Division is committed to prosecuting all matters of major significance.

Based on these general guidelines, a request for a PI is reviewed by the appropriate Director of Enforcement. If the request is approved and FTC clearance is obtained, PI authority is granted.

2. Making a Request for Preliminary Inquiry Authority

Once an attorney has developed a sufficient factual and legal basis to believe that a matter is appropriate for formal investigation, the attorney should prepare a short factual memorandum to the section, task force, or field office Chief describing the nature and scope of the activity (the "PI Request Memo") using the "Request For PI Authority" macro. This PI Request Memo should set forth the following information on the first page:

1. the commodity or service to be investigated;

2. the alleged illegal practice (the specific practice should be outlined if practicable, e.g., price fixing, boycott, monopolization, illegal acquisition, etc. -- not merely "restraint of trade");

3. the relevant statute (e.g., Section l, Sherman Act);

4. the parties involved (state the full name and location of the known companies and their corporate parents, as well as individuals involved);

5. the amount of commerce affected on an annual basis (if information is unknown, provide a reasonable estimate); and

6. the geographic area involved (e.g., nationwide, worldwide, Eastern Virginia, etc.).

This detailed information is necessary to evaluate the request, to obtain FTC clearance, and to determine whether any other Division component is investigating, or has investigated, the same activity. Staff must develop this information only from public sources, governmental entities, or the complainant, however, because the staff may not initiate contact with the parties or other private entities prior to approval of the request and FTC clearance.⁽²⁾

After this basic information is set forth, the staff should provide a factual summary of the information upon which the request is based. Evidence supporting a potential antitrust violation, as well as any contrary evidence, should be briefly described. Special considerations, such as the existence of private litigation, a statute of limitations problem, the presence of a governmental agency as a potential victim, the possible precedential or deterrent impact of the matter, or other legal or factual circumstances relevant to the decision-making process should be discussed. For matters that will likely remain civil, potential defenses should be identified and addressed, and relevant economic issues should be outlined. The potential significance of the matter from an economic and antitrust enforcement perspective should be evaluated. The memo should also briefly describe the proposed course of the investigation, including the estimated duration, anticipated developments, and important (or even dispositive) issues; the attorneys to be assigned to the investigation should also be listed. If the request is based on a Hart-Scott-Rodino filing, the date on which the initial waiting period expires should be included. PI memos may vary somewhat depending on the type of case,⁽³⁾ and exemplars may be obtained from the appropriate Special Assistant.

In the case of a potential criminal violation, there are sometimes situations where the staff has already developed sufficient information to request authority to conduct a grand jury investigation. In these circumstances, the staff may bypass preliminary inquiry authority and simply request grand jury authority. (The process for requesting grand jury authority is discussed further in Section F, infra.)

The PI Request Memo is forwarded (typically by e-mail) to the section, task force, or field office Chief. The Chief then reviews the request. If the Chief approves, then the PI Request Memo is e-mailed to the "PI Request" mailbox and to the Special Assistant responsible for the component. (If the PI Request originates from a predominantly criminal section (a field office or the Lit I section), the e-mailed PI Request memo should also be addressed to the CRIM-ENF mailbox.) At the same time the PI Request memo is sent forward, an "AMIS New Matter Form" (ATR 141) should also be sent to the Premerger Notification Unit/FTC Liaison Office (by e-mail to the AMIS mailbox). See Division Directive ATR 2810.1 "Antitrust Management Information System (AMIS)" for instructions on the completion of this form.

Once a PI Request Memo is received in the PI Request mailbox, clearance is requested from the FTC. (This process is discussed in more detail in Chapter VII, Section A.). The Premerger Notification Unit/FTC Liaison Office notifies the requesting section, task force, or field office when clearance is granted. Absent special circumstances, the Division component seeking the PI will receive the assignment after FTC clearance is received. Special circumstances include special expertise by another section, task force, or field office or resource problems in a section, task force, or field office at a particular time.

The Premerger Notification Unit/FTC Liaison Office transmits a copy of the PI Memo to the Economic Analysis Group ("EAG") at the time clearance is requested, and notifies EAG, along with the requesting legal component, when clearance is granted. (For all significant civil non-merger PI requests, EAG should have been informally consulted by the section, task force, or field office prior to the forwarding of the PI request to the PI Request mailbox.) The Chief of the EAG section to which the matter is referred then assigns an economist. The assigned economist will work with the legal staff on all matters requiring economic or statistical analysis.

3. FTC Clearance Procedure

All requests for authority to initiate a new investigation are cleared with the Federal Trade Commission. The Premerger Notification Unit/FTC Liaison Office requests FTC clearance for each new investigation when the preliminary inquiry memo is submitted to the PI Request mailbox. If the FTC raises questions concerning the request, the staff may be asked to provide more detailed information.

Where time is of the essence, it is important to submit a PI request immediately if a section, task force, or field office wishes to conduct an investigation. In special circumstances such as a cash tender offer in a merger matter, or upcoming opportunities to conduct consensual monitoring in a potential criminal investigation, the Chief or Assistant Chief should immediately contact the appropriate Special Assistant by telephone, by e-mail, or in person so that expedited clearance can be requested from the FTC. When FTC clearance is granted and when the investigation is opened, the Premerger Notification Unit/FTC Liaison Office will inform the section, task force, or field office so that the investigation may begin. If staff does not receive any information concerning clearance within a week after submitting a PI Request Memo, it should contact the Division's FTC Liaison Officer (the Senior Special Assistant) and inquire.

The Division's clearance and liaison procedures with the Federal Trade Commission are described fully in Chapter VII, Section A.

4. Referral of a Matter to Another Prosecutorial Agency

Sometimes, a particular matter should more properly be investigated by another federal agency or a state or local prosecutorial agency rather than the Antitrust Division. If the matter involves an issue that is not of direct antitrust significance, it may be referred to an appropriate state or local agency, e.g., a state consumer protection agency.

If the matter is an antitrust matter that is localized, or involves a relatively small amount of commerce, the Division may refer the matter to the antitrust section of the appropriate state attorney general's office. When such a referral is under consideration, the appropriate Director of Enforcement and Senior Counsel to the Assistant Attorney General (or other person in charge of state liaison) should be consulted.

When a referral to another agency is made, the Chief of the section, task force, or field office should prepare a letter to the appropriate state or federal official, setting forth the facts that have been developed, asking the official to express the agency's interest in the matter, and requesting that the official inform the Division of acceptance or rejection of the referral. In all cases, the letter should be a self-contained document and should never be a copy of internal Division memoranda or work product. It should include any documentation the Division has received, to the extent that disclosure is advisable and not precluded by law. A copy of each referral letter should be sent to the appropriate Director of Enforcement.

If the staff attorney or Chief of the section, task force, or field office has a question regarding a particular referral, he or she should consult with the Special Assistant responsible for the component.

C. Conducting the Preliminary Inquiry

When preliminary inquiry authority is requested, the staff, in consultation with the Chief, should plan the investigation considering time limitations. Although each investigation will be different from any other, certain general principles apply to assist the staff in (a) allocating resources effectively; (b) obtaining useful documentary and testimonial evidence; and (c) using the services and technical resources of the Division. See infra Chapter VI, Section B.

1. Planning the Investigation

At the beginning of any investigation, the staff should immediately determine the scope and focus of its investigative effort. Planning sessions should take place at the time the preliminary inquiry request is being processed. At this stage, the Chief and the legal and economic staff should establish a plan describing what is to be done, and how and when it will be done, and who will do each task.

For example, in a civil investigation thought should be given as to how best to elicit different types of needed information--from interviews, depositions, documents, or interrogatories--as well as what economic evidence, and what support from EAG, is needed. This investigative plan should also provide for early development of the legal and economic theory to be relied upon and a determination of the relief to be sought. The key premise of the plan is that from the outset of an investigation the staff's theory of the case should be well-defined, although it is expected that the theory of the case will be refined as the investigation proceeds. In most instances, this plan should include the drafting of an outline of proof. An outline of proof is a living document prepared jointly by the legal and economic staff that should be revised regularly as the factual underpinnings of the case come into focus. For civil non-merger cases, this outline will normally start with a recommendation outline and end in findings of fact. In merger cases, it should provide the evidence for each element of the merger Guidelines with highlights from the best documents, depositions, or affidavits. It should also include an evaluation of the defendant's evidence and legal and economic theories. Another tool, the case agenda, becomes more important as staffs grow. The case agenda can take one of two forms, the calendar model or the to-do list model. In some cases both may be usefully employed.⁽⁴⁾ Software packages are available that can assist with the outline of proof and case agenda.

Resources available to the staff in beginning the investigation are outlined in Chapter VI, Section B, the Guide to Conducting Antitrust Investigations. The Guide analyzes and defines the Division's investigatory techniques and procedures in detail, including use of economic resources, data processing and other information retrieval methods, and other source materials generally found useful in investigation and litigation efforts.

2. Obtaining Assistance from Federal Agencies

During the course of the preliminary inquiry, the staff may require assistance in conducting interviews of industry officials, locating individuals whose whereabouts are unknown, compiling statistical data, or performing various other investigative functions. When such assistance is necessary, the staff should consider requesting the services of other federal agencies.

1. Federal Bureau of Investigation

To obtain FBI assistance, the staff, with the concurrence of the Chief, should prepare a memorandum from the Director of Criminal Enforcement, Antitrust Division, to the Chief, White Collar Crime Section, Criminal Investigative Division, Federal Bureau of Investigation. The memorandum should be in outline form covering the following six elements:

1. Introduction. A brief introductory paragraph consisting of (a) a general description of the investigation; (b) the geographic area(s) of the investigation; (c) the type(s) of assistance the FBI is being asked to provide; and (d) the name(s) and telephone number(s) of the Division attorney(s) with whom the assigned agent should consult.

2. Synopsis of Allegations. A synopsis of the allegations, including the basis for initiating an investigation and a listing of the corporate and individual subjects of the investigation with identifying information, e.g., location and position.

3. Possible Federal Violations. A listing of the specific Federal statutes that may have been violated or may be charged if evidence is developed to support the allegations.

4. Judicial District. The judicial district where charges would be filed if evidence is developed to support the allegations.

5. Other Investigatory Agencies. The involvement of any other investigatory agencies that have participated or may participate in the investigation.

6. Conclusion. A brief statement confirming that if the FBI is successful in developing evidence to support the filing of charges, the Department will prosecute the matter.

The memorandum should be sent via e-mail to the CRIM-ENF mailbox with a cc to the appropriate Special Assistant. The memo is reviewed by the Special Assistant responsible for the requesting office and given to the Director of Criminal Enforcement for review and approval before being forwarded to FBI Headquarters. Once FBI Headquarters has processed the request and assigned it to the appropriate FBI office (a routine request takes about 10 working days), the agent or agents assigned to the matter will contact the staff directly and begin the investigation. After the initial request is made and an agent is assigned, further requests for assistance may be made directly to the assigned agent.

If staff requires FBI assistance to perform a criminal records search in connection with trial preparation and the FBI has not previously participated in the investigation of the matter, then a memorandum from the Director of Criminal Enforcement, Antitrust Division must be sent to the Chief, White Collar Crime Section, Criminal Investigative Division, Federal Bureau of Investigation. The memorandum should include the following information:

1. Introduction. A statement requesting assistance in conducting a criminal records check of defendant(s) and potential witnesses in connection with a trial. The statement should include the following information: the name of the case, criminal number, and district; the date the trial is expected to begin; the date the results of the FBI check are needed; and the name and phone number of the contact person at the Division.

2. The Indictment. A brief statement of the charges in the indictment and when the indictment was returned.

3. Identifying Information. A list of the defendants first and then the witnesses (each in alphabetical order) with the following identifying information: name; address; country of citizenship; social security number; and date of birth. (Note: If the defendant(s) is a company, please indicate after the company name the name of a high-ranking official -- owner, president, CEO, etc. -- with the identifying information listed above for that person.)

Any questions about FBI assistance should be referred to the Special Assistant responsible for the requesting office. A sample FBI assistance memo follows:

Memorandum

Subject:	Request for FBI Assistance in (insert commodity) Investigation	Date:
To:	Chief, White Collar Crime Section Criminal Investigative Division Federal Bureau of Investigation Attn: (name) Chief, Governmental Fraud Unit	From:	(Name) Director of Criminal Enforcement Antitrust Division

Introduction The Antitrust Division is conducting an investigation of price fixing among the major distributors in Yakima, Washington of ................................... We request FBI assistance on all phases of the investigation. Initially, we request agent assistance in interviewing possible witnesses. Joe Blow and Jane Doe, trial attorneys in the San Francisco Field Office (415) 436-6660, have been assigned to this matter. Synopsis Of Allegations On interview, ............................................., provided the following evidence of possible price fixing on ............................... in Yakima, Washington: Subjects of the investigation include: Corporations Name and location(s) Individuals Name, address, corporate affiliation, position, Possible Federal Violations The conduct alleged here could possibly be prosecuted under 15 U.S.C. § 1 and 18 U.S.C. § 1341 or 18 U.S.C. § 1343. Judicial District Any charges arising from this investigation would likely be filed in the Eastern District of Washington in Yakima. Other Investigatory Agencies We do/ do not anticipate that any other investigatory agencies will participate in the investigation of this matter. Conclusion FBI support would be of substantial assistance to the Department in investigating this alleged violation. Of course, if the FBI is successful in developing evidence to support the filing of charges, the Department will prosecute the matter.

* * * * *

2. Other Federal Agencies

If an investigation involves procurement by a federal agency such as the Department of Defense, staff should consider seeking the assistance of the Inspector General's Office for the particular agency. IG agents have in the past proven to be very helpful in collecting and analyzing bid or pricing data, in interviewing potential witnesses, and in helping Division attorneys to understand a particular agency's procurement system and regulations. No special Division procedures are required for obtaining the assistance of IG agents, and each section, task force, or field office should make whatever arrangements are appropriate directly with the Inspector General's office for the agency involved. If questions or problems arise, however, staff should discuss the matter with the appropriate Director or Deputy Assistant Attorney General.⁽⁵⁾

3. Obtaining Information by Voluntary Requests

During the preliminary inquiry stage, Antitrust Division staffs often rely upon voluntary requests for information--both in the form of interviews and requests for documents--from the potential subjects of the investigation, other companies within the industry, customers, trade associations and other sources. Voluntary requests may be useful to keep communications less formal, avoid the adversarial tone injected by use of compulsory process, and speed collection of useful information. Although reliance on voluntary requests to obtain documentary evidence has become less common in recent years, it is still an alternative to be considered by the staff in developing and implementing its investigative strategy.⁽⁶⁾

1. Considerations In Using Voluntary Information Requests

While there are no firm rules to guide Division attorneys in deciding whether to use a voluntary request or a CID in seeking documents and other information, some guidelines may be of assistance. Generally, when a large volume of documents is sought, it is best to proceed by compulsory process. The formalities of compulsory process are better designed to ensure full and timely compliance with an extensive request than the less formal procedures of the voluntary request. Additionally, where an investigation may result in an application for a preliminary injunction, use of CID process should normally be employed to avoid the possibility that voluntary cooperation may cease or that production of requested documents may be delayed so long that it interferes with the government's ability to present a strong case for preliminary relief.

2. Confidentiality Considerations

Information that is not produced in response to a CID or as part of the HSR process (including information revealed in an interview conducted in lieu of a CID deposition) is not protected by the statutory provisions of the CID or HSR statutes.⁽⁷⁾Accordingly, parties will often seek written confidentiality assurances that the information they submit will be protected from disclosure under the Freedom of Information Act ("FOIA") or that they will be given advance notice if such disclosure is contemplated. It is not uncommon for the Division to provide a "confidentiality letter," particularly for interviews, at the request of parties in order to expedite an investigation.

Assurances of confidentiality and notice normally should not exceed those established by Department regulation. See 28 C.F.R. § 16.8. Any assurances of confidentiality or notice should cover only information that the submitter has in good faith designated as confidential and should be limited to a reasonable time period. Further, the assurance should never guarantee absolute confidentiality, but rather should bind the Division only as to what action it will take in its initial response to a Freedom of Information Act request.⁽⁸⁾ FOIA disclosure of non-CID, non-HSR information by DOJ is governed by 28 C.F.R. § 16.8.⁽⁹⁾ Such information receives considerable protection from FOIA disclosure under exemption (b)(4) (regarding confidential business information). For the regulation and exemption to apply, parties should request confidential treatment and identify confidential documents. The typical Division confidentiality letter states that the Division will treat information that they provide as business information for purposes of 28 C.F.R. § 16.8., that the Division will act in accordance with our stated policy (28 C.F.R. § 16.8), and that the Division will assert all applicable exemptions to disclosure.⁽¹⁰⁾ Seeinfra Chapter VI, Section G (describing FOIA procedures and exemptions).

A typical confidentiality letter reads as follows:⁽¹¹⁾

Dear Mr./Ms. Lawyer:

You have requested a statement regarding the United States Department of Justice's ("Department") treatment of sensitive information which it may receive from your client in response to our request for the voluntary production of information, including information provided in an interview and/or memorialized in voluntarily produced documents. It is in the Department's interest to protect the confidentiality of sensitive information provided by its sources, and to prevent competitively sensitive information from being shared among competitors. Accordingly, sensitive information will only be used by the Department for a legitimate law enforcement purpose, and it is the Department's policy not to disclose such information unless it is required by law or necessary to further a legitimate law enforcement purpose. In the Department's experience, the need to disclose sensitive material occurs rarely.

Sensitive information includes "confidential business information" which means trade secrets or other commercial or financial information (a) in which the company has a proprietary interest or which the company received from another entity under an obligation to maintain the confidentiality of such information, and (b) which the company has in good faith designated as confidential. The Department's policy with regard to confidential business information is to treat it, for ten years, in the manner set forth in this letter.

In the event of a request by a third party for disclosure of confidential business information under the Freedom of Information Act, the Department will act in accordance with its stated policy (see 28 CFR § 16.8, a copy of which is enclosed) and will assert all applicable exemptions from disclosure, including those exemptions set forth in 5 U.S.C. §§ 552(b)(4), (b)(7)(A) and (b)(7)(D) (to the extent applicable). See also Critical Mass Energy Project v. Nuclear Regulatory Commission, 975 F.2d 871, 880 (D.C. Cir.1992) (voluntarily submitted financial or commercial information not customarily released to the public is protected), cert denied, 507 U.S. 984 (1993).

In the event of a request by a third party for disclosure of any appropriately designated confidential business information under any provision of law other than the Freedom of Information Act, it is the Department's policy to assert all applicable exemptions from disclosure permitted by law. In addition, the Department's policy is to use its best efforts to provide the company such notice as is practicable prior to disclosure of any confidential business information to a third party who requests it under any provision of law other than the Freedom of Information Act.

Although it is the Department's policy not unnecessarily to use sensitive information in complaints or court papers accompanying a complaint, which are publicly available documents, the Department cannot provide an absolute assurance that sensitive information will not be included in such documents. If a complaint is filed, it is the Department's policy to notify your client as soon as is reasonably practicable of any decision by the Department to use confidential business information for the purpose of seeking preliminary relief. Our policy is generally to file under seal any confidential business information used for such purpose and advise the court that your client has designated the information as confidential. Moreover it is the Department's policy to make reasonable efforts to limit disclosure of the information to the court and outside counsel for the other parties to the litigation until your client has had a reasonable opportunity to appear before the court and, if your client appears, until the court has ruled on its application. To that end, it is the Department's policy not to oppose a court appearance by your client for the purpose of seeking protection for the confidential business information used, or to be used, during the preliminary relief proceedings.

If confidential business information becomes the subject of discovery in any litigation to which the Department is a party, it is the Department's policy to use its best efforts to assure that a protective order applicable to the information is entered in the litigation. In addition, our policy is to not voluntarily produce the confidential business information until your client has had a reasonable opportunity to review and comment on the protective order and to apply to the court for further protection. It is the Department's policy not to oppose a court appearance by your client for this purpose.

Please do not hesitate to call me at (zzz) xxx-yyyy if you have any questions.

    Sincerely yours,



Pat Attorney

The administrative burdens involved in complying with non-statutory assurances of confidentiality or advance notification, sometimes years later, are not easily managed, particularly when documents are involved. For this reason, in the case of documents, staffs should carefully consider whether to use a confidentiality letter; a CID is usually preferable. (In either case, parties should mark the appropriate documents "confidential" and indicate a period of time for which confidential treatment is requested, recognizing that such designations are not binding on a court.)

On occasion, the Division has encouraged cooperating third parties or subjects to give us documents "in anticipation of a CID" and then issued a CID specifying the documents shortly thereafter. Although this is not the preferred practice since the extent of protection this offers has not been tested in the courts, it can be used when there is a need to get the documents expeditiously.

Parties frequently want to produce "white papers" discussing aspects of an investigation. If they desire CID protection, the Division can issue a CID either with an interrogatory asking for their views on whatever is contained in the white paper, or a CID with a single document request identifying the white paper by name and date. In the case of an interview, a CID is not possible without converting the interview into a deposition--which may not be desirable. Accordingly, a confidentiality letter may be the only option in some situations.

Ultimately, if the recipient of a voluntary request declines to furnish information absent the usual assurances of confidentiality, the better practice is usually for the staff attorney to prepare a CID compelling the production of the desired documents or information.

4. Status Reports on Investigations

In addition to the reporting requirements of AMIS, a periodic update on the progress of each investigation is given at the section's, task force's, or field office's periodic status meeting with the Deputy Assistant Attorney General responsible for that component and the appropriate Director of Enforcement. These status meetings are designed to monitor the progress of each investigation and to discuss the legal and economic theories underlying the investigation. In addition to these meetings, special status meetings are held for individual investigations at critical points. Ordinarily, staff should prepare an updated order/outline of proof and case agenda for presentation and distribution at such meetings.⁽¹²⁾

5. Standards for Determining Whether to Proceed By Civil or Criminal Investigation

On its face, Section 1 of the Sherman Act, 15 U.S.C. § 1, makes any contract, combination or conspiracy in restraint of trade a criminal offense. In addition, the Department of Justice has the authority to bring equitable actions to prevent and restrain all antitrust violations. See 15 U.S.C. §§ 4, 25. This section provides guidance on when it is appropriate to begin an investigation of a suspected antitrust violation using criminal process and, alternatively, when civil process should be employed.

Many investigations that are conducted by the Antitrust Division are by their very nature civil investigations, e.g., merger investigations. Nevertheless, there are some situations where the decision to proceed by criminal or civil investigation requires considerable deliberation. In general, current Division policy is to proceed by criminal investigation and prosecution in cases involving horizontal, per se unlawful agreements such as price fixing, bid rigging and horizontal customer and territorial allocations. Civil process and, if necessary, civil prosecution is used with respect to other suspected antitrust violations, including those that require analysis under the rule of reason as well as some offenses that historically have been labeled "per se" by the courts. There are a number of situations where, although the conduct may appear to be a per se violation of law, criminal investigation or prosecution may not be considered appropriate. These situations may include cases in which: (1) there is confusion in the law; (2) there are truly novel issues of law or fact presented; (3) confusion reasonably may have been caused by past prosecutorial decisions; or (4) there is clear evidence that the subjects of the investigation were not aware of, or did not appreciate, the consequences of their action.

During the preliminary inquiry stage of the investigation, the staff makes the determination on whether to conduct the remainder of the investigation as a grand jury, CID, or Second Request investigation. In general, however, the nature of the suspected underlying conduct should determine the nature of the investigation. Thus, when the conduct at issue appears to be conduct that the Division generally prosecutes in a criminal case, the investigation should begin as a criminal investigation absent clear evidence that one of the complicating factors that might make the case inappropriate for criminal prosecution is present. Where it is unclear whether the conduct in question would be a civil or criminal violation, the relevant Director of Enforcement should be consulted before any decision is made concerning the nature of the investigation. Among other things, early Front Office involvement might result in a decision that certain conduct is inappropriate for criminal prosecution. Alternatively, the staff might be instructed to continue its preliminary investigation but to focus on facts that might be relevant in determining whether a grand jury should be convened.

The decision to convene a grand jury has several consequences, including restrictions on how the government can use certain evidence gathered during the course of the grand jury's investigation. For example, in United States v. Sells Engineering, Inc., 463 U.S. 418 (1983) and United States v. Baggot, 463 U.S. 476 (1983), the Supreme Court restricted the government's ability to use evidence gathered during the course of a grand jury investigation in a subsequent civil case. In Sells, the Court held that Fed. R. Crim. P. 6(e) prohibits the disclosure of grand jury materials to Department of Justice attorneys who were not involved in the grand jury proceedings unless the government obtains a court order based on a showing of particularized need. However, the Court expressly declined to address "any issue concerning continued use of grand jury materials, in the civil phase of a dispute, by an attorney who himself conducted the criminal prosecution." 463 U.S. at 430 n.15.

The issue left unresolved in Sells was considered in In re Grand Jury Investigations, 774 F.2d 34 (2d Cir. 1985). In that case, the Second Circuit held that the general secrecy concerns discussed In Sells compelled it to conclude that a Rule (6)(e) order was required before the Antitrust Division attorneys who had conducted a grand jury investigation could be allowed continued access to grand jury materials during any subsequent civil case. The Supreme Court reversed, holding that an attorney who conducted a criminal prosecution may make continued use of grand jury materials In the civil phase of the dispute without obtaining a court order to do so under Rule 6(e), holding that "Rule 6(e) does not require the attorney to obtain a court order before refamiliarizing himself or herself with the details of a grand jury investigation.'' United States v. John Doe, Inc. I, 481 U.S. 102, 111 (1987).⁽¹³⁾

6. Evaluating the Results of a Preliminary Inquiry

The normal period of time required to conduct a preliminary inquiry ranges from a few weeks to a few months. After this period, the staff should be prepared to proceed by further voluntary requests, by CID, by Second Requests, by grand jury, or to close the investigation.

In making this determination, the staff should consult with the section, task force, or field office Chief and the relevant EAG Chief to discuss the results of the investigation. In many investigations, the next step In the investigation will be relatively clear; however, In others the decision whether to continue the investigation will require deliberation and consultation. If there are questions that remain to be resolved, the section or field office Chief may wish to consult informally with the relevant Director of Enforcement before making a recommendation.

The staff recommendation to proceed by grand jury investigation or by CID investigation must be processed through the appropriate Director of Enforcement and the appropriate Deputy Assistant Attorney General, and such investigations require the approval of the Assistant Attorney General.⁽¹⁴⁾

7. Closing an Investigation⁽¹⁵⁾

If, after analysis of the conduct or transaction, the staff and the Chief believe that the matter should not be investigated further, staff should prepare a memorandum recommending that the investigation be closed. If a separate memorandum will not be submitted by the economist assigned to the matter, the legal staff's memorandum should state whether the economist concurs In the recommendation to close. If the Chief concurs, the recommendation is e-mailed to the Special Assistant responsible for the component. The appropriate Director of Enforcement will review the memo and either close the investigation or request additional information or investigation. At the time the closing memo is e-mailed to the appropriate Special Assistant, an AMIS "Matter Modify/Close Form" should be sent to the Premerger Notification Unit/FTC Liaison Office by e-mail.

After the decision is made to close the investigation, the section, task force, or field office will receive back a copy of the closing memo indicating what date the matter was closed. The staff should then notify the subjects of the investigation that the matter is closed,⁽¹⁶⁾ close its file on the matter, and process all documentary material received during the investigation in accordance with the provisions of Division Directive ATR 2710.1, "Procedures for Handling Division Documents." In the event that staff needs to know quickly when a matter has been closed, it should call the appropriate Special Assistant or the Premerger Notification Unit/FTC Liaison Office.

D. Conducting a Merger Investigation

The Antitrust Division investigates proposed mergers and acquisitions to determine whether they may substantially affect competition and violate Sections 1 or 2 of the Sherman Act, 15 U.S.C. §§ 1-2, or Section 7 of the Clayton Act, 15 U.S.C. § 18. In determining whether a merger is anticompetitive, staff should apply stated Division merger enforcement policy. The Division's enforcement policy concerning horizontal mergers is articulated in the joint U.S. Department of Justice/Federal Trade Commission ("FTC") Horizontal Merger Guidelines, released in 1992, revised in 1997, and reprinted in Chapter II. Division policy on vertical mergers is found in the U.S. Department of Justice Merger Guidelines released in 1984. Other sources of Division policy are the public statements of responsible officials.

The great majority of mergers and acquisitions do not raise serious competitive issues and staff should endeavor to review these transactions as expeditiously as possible. When investigating transactions that raise significant competitive issues, staff should always keep in mind its dual role: staff must determine whether a merger or acquisition may substantially affect competition and also must obtain sufficient evidence to successfully challenge an anticompetitive transaction. Portions of this section discuss how merger investigations should be structured to fulfill these goals.

Most significant mergers and acquisitions must be reported to the Division and the FTC before they occur. The premerger notification provisions of Section 7A to the Clayton Act, 15 U.S.C. § 18a, enacted as part of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, require enterprises exceeding certain thresholds to notify the Division and the FTC of the proposed transaction, submit documents and other information to the agencies concerning the transaction, and refrain from closing the transaction until a specific waiting period has expired. Since most of the Division's merger investigations will be conducted under the provisions of the Act, the structure of the Act provides the basic structure for merger investigations and attorneys should be familiar with the provisions of the premerger notification statute and rules that implement it.

1. A Basic Guide to the Premerger Notification Statute and Rules

This section describes the premerger notification procedures employed by the Division and FTC. Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR"), 15 U.S.C. § 18a, as amended,⁽¹⁷⁾ requires parties to certain mergers or acquisitions to notify both the Division and the FTC before consummating the proposed transaction and to submit certain information to both agencies. After notification, the parties must wait a specified time, usually 30 days (15 days for cash tender offers or bankruptcy sales⁽¹⁸⁾), before the transaction can be consummated. The statute also allows the enforcement agencies to make a request for additional information which extends the waiting period.

The statute grants broad rulemaking authority to the FTC, with Division concurrence, to implement Title II. The Rules, Regulations, Statements and Interpretations under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("Rules") are codified at 16 C.F.R. §§ 801-803. Questions regarding specific aspects of the Rules should be directed to the Legal Policy Section, the Premerger Notification Unit/FTC Liaison Office, or the appropriate Special Assistant. Attorneys may wish to consult the FTC's publication entitled Premerger Notification Source Book which contains the Act, the Rules, and their accompanying Federal Register Statements of Basis and Purpose and formal interpretations. The Source Book is available from the Antitrust Library. This information and additional current information relating to HSR can be found on the FTC Premerger Notification Office's web page, www.ftc.gov/bc/hsr/hsr.htm. See also ABA Section of Antitrust Law, The Merger Review Process (1995).

This section sets forth the basic rules with which attorneys conducting merger investigations should be familiar. The complete text of the Act and Rules should be consulted for specific information. Staff should generally not attempt to answer questions from the public about the reportability of particular transactions, filing mechanics, and filing fees. Such questions should be directed to the FTC Premerger Notification Office (telephone number (202) 326-3100).

1. Determining Whether the Act Applies

   1. Tests

For a transaction be reportable it must first satisfy the "commerce test": either the acquiring or the acquired person must be engaged in commerce or in any activity affecting interstate commerce.⁽¹⁹⁾ If the transaction meets the commerce test and, as a result of such acquisition, the acquiring person would hold voting securities or assets worth in the aggregate more than $200 million, the transaction is reportable.⁽²⁰⁾ If, however, the acquiring person would hold voting securities or assets worth in the aggregate less than $200 million, the transaction must satisfy the following two tests in addition to the commerce test described above:

(a)	size-of-person test -- one party to the transaction must have annual sales or assets of at least $100 million and the other party $10 million;(21) and
(b)	size-of-transaction test -- as a result of such acquisition, the acquiring person must hold voting securities or assets worth in the aggregate more than $50 million.(22)

Thus, $50 million is an absolute floor on reporting -- if an acquiring person would not hold voting securities or assets valued at greater than $50 million as a result of an acquisition, the acquisition is not reportable.

2. Definitions

Part 801 of the Rules defines the statutory terms in these tests and the methods for calculating whether the "size-of-person" and "size-of-transaction" tests are met.

The definition of "person," "entity," and "ultimate parent entity" in Section 801.1(a), the definition of "control" in Section 801.1(b), and the definition of "hold" in Section 801.1(c) of the Rules will be particularly important in making these determinations.

3. Calculating the Thresholds

Section 801.11 explains how to calculate whether the "size-of-person" test is met. Sections 801.10 and 801.13 of the Rules explain how to determine the value of voting securities or assets held as a result of an acquisition, for purposes of deciding whether the "size-of transaction" test is met.

4. Special Types of Transactions

Part 801 also contains a series of rules dealing with special types of transactions. Section 801.4 explains the concept of "secondary acquisitions." Whenever as a result of an acquisition ("the primary acquisition"), an acquiring person will obtain control of an entity that holds voting securities of another entity which it does not control, then that second aspect of the acquisition (the secondary acquisition) is separately subject to the Act and the Rules under Section 801.4.

Section 801.30 provides that the waiting period begins for certain types of acquisitions when the acquiring person files.⁽²³⁾ Among the seven types of transactions afforded this special treatment under Section 801.30 are: (a) acquisitions of voting securities on a national securities exchange or "over the counter," (b) acquisition of voting securities by means of a tender offer, (c) acquisitions (other than mergers and consolidations) in which voting securities are acquired from someone other than the issuer or related entity, and (d) secondary acquisitions. For all other acquisitions, the waiting period does not begin until all persons required to file have filed.

Section 801.32 makes clear that conversion of convertible voting securities is a potentially reportable acquisition under the Act. Section 801.40 establishes the reporting scheme for formation of new corporations, particularly new corporate joint ventures. Under Section 801.40(a), each contributor to the corporate joint venture is deemed an acquiring person, and the corporation itself is deemed an acquired person. Section 801.40(c) contains its own "size-of-person" tests applicable to any transaction (except in connection with a merger or consolidation, or a transaction where an acquiring person would hold voting securities or assets of the newly formed corporation worth in the aggregate more than $200 million) in which a new corporation is formed, provided that the criteria of the commerce and "size-of transaction" tests are satisfied. A special rule for determining the total assets of the new corporation is stated in Section 801.40(d), and a special rule relating to the commerce test of § 7A(a)(1) of the Clayton Act, 15 U.S.C. § 18a(a)(1), is contained in Section 801.40(e).

2. Exemptions to the Reporting Requirements

Exemptions to the reporting scheme are found in §§ 7A(c)(1) through (c)(11) of the Clayton Act. See 15 U.S.C. §§ 18a(c)(1)-(11). These statutory exemptions include:

(1)	Acquisitions of goods and realty in the ordinary course of business;
(2)	Acquisitions of non-voting securities;
(3)	Acquisitions of voting securities, solely for the purpose of investment, if as a result of such acquisition the acquiring person does not hold more than 10% of the voting securities of the issuer;
(4)	Transactions which require agency approval under certain statutes, such as the Bank Holding Company Act (in certain cases, material submitted to the agency must be filed with the FTC and the Antitrust Division 30 days before consummation);
(5)	Transfer to or from a federal agency or a state or a political subdivision thereof;
(6)	Transactions specifically exempted from the antitrust laws; and
(7)	Transactions specifically exempted from the antitrust laws if approved by a federal agency and if copies of all material submitted to such agencies are contemporaneously filed with the FTC and the Antitrust Division.

Part 802 of the Rules explains these exemptions and contains additional ones.⁽²⁴⁾ For example, Section 802.8 exempts certain supervisory acquisitions of savings and loan institutions. Section 802.21 exempts acquisitions of voting securities if a notification threshold will not be met or exceeded. (The notification thresholds are defined in Section 801.1(h).) Section 802.23 deals with renewed and amended tender offers. Section 802.30 exempts intra-enterprise transactions. Sections 802.50-.53 exempt many types of transactions dealing with foreign assets and/or foreign persons, often on the basis of limited nexus to United States commerce. Certain acquisitions by creditors, insurers, and institutional investors are also exempted by Sections 802.63-.64.

A new set of exemption rules were promulgated in 1996 for certain categories of transactions that the agencies believe, based on enforcement experience, are not likely to violate the antitrust laws. See Sections 802.1-.5. These exemptions include certain real estate acquisitions, such as acquisitions of shopping centers, hotels and motels, and unless much higher thresholds are met, acquisitions of oil, gas, and coal reserves.

3. Filing Mechanics

Part 803 outlines the reporting procedures. The Notification and Report Form (Appendix to Part 803 of the Rules) must be completed in accordance with Section 803.1, and with the instructions appearing in Section 803.2 and on the form itself. Whenever the person filing notification is unable to supply a complete response to any item on the form, a statement of reasons for noncompliance must be supplied, in accordance with Section 803.3. Each Notification and Report Form must be accompanied by one or more affidavits and each form must be certified, as provided in Sections 803.5-.6 of the Rules.

In the special case in which a foreign-acquired person refuses to file notification, Section 803.4 may apply.

Section 803.7 provides that reported transactions must be consummated within one year following the expiration of the waiting period. If the reported transaction is not consummated within one year, an additional filing must be made and waiting period observed before the transaction may be consummated.

4. Waiting Period

Sections 7A(a) and (b) of the Clayton Act state that, where notification is required with respect to a contemplated acquisition of assets or voting securities, that transaction may not legally be completed until notification has been accomplished and a 30-day waiting period has thereafter expired (only 15 days is required in the case of a cash tender offer or a bankruptcy filing). The waiting period may be extended by issuance of a request for additional information, as is described in Section D.1.f. infra. The request generally extends the waiting period until 30 days (10 days in the case of a cash tender offer or bankruptcy filing) after the parties comply with the request.⁽²⁵⁾ However a request for additional information to the target of a tender offer (whether or not a cash tender) or to an acquired person in a bankruptcy transaction covered by 11 U.S.C. § 363(b) does not extend the waiting period. See 15 U.S.C. §18a(e)(2); see also infra Section D.1.f.

In some instances, parties have wanted to give the agencies additional time to determine whether to issue a request for additional information. This objective may be accomplished in some instances by withdrawal and nearly immediate resubmission of the acquiring person's HSR form. The FTC Premerger Notification Office (telephone (202) 326-3100) can provide details on how the parties may be able to re-start the waiting period in this manner without having to pay an additional filing fee.

Section 803.10(a) of the Rules explains when the waiting period begins, and Section 803.10(b) explains when it expires. It also addresses deficient filings. If the initial filing or second request response does not comply with the Rules, the filing person is to be notified promptly of the deficiencies. See infra Section D.2.c (discussing procedures in cases of deficiencies). When a filing complying with the rules is received the filing is deemed complete for purposes of triggering the running of the waiting period. Section 7A(b)(2) of the Clayton Act permits the FTC and the Assistant Attorney General in charge of the Antitrust Division to terminate the waiting period before it expires in certain cases.

5. Early Termination of the Waiting Period

Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2), authorizes the FTC and the Antitrust Division to grant early termination of the Act's waiting period. A Formal Interpretation has been issued that describes the standards for early termination. Under the Formal Interpretation, early termination will normally be granted where (1) it has been requested in writing, (2) all parties have submitted their notification and report forms, and (3) both enforcement agencies have determined not to take enforcement action during the waiting period. In addition, early termination may be granted even absent a request in instances in which a Second Request has been issued. See 16 C.F.R. § 803.11(c).

All early terminations, regardless of when granted, must be cleared through the FTC and the Act requires that notice that early termination has been granted be published in the Federal Register.

(a) If no preliminary inquiry authority has been sought and the section, task force, or field office Chief and staff agree that early termination is appropriate, they should notify the Division's Premerger Notification Unit/FTC Liaison Office promptly so that the response to the request may be relayed to the FTC without delay. See infra Section D.2.d(i) (describing the mechanics of this process).

(b) If the Division has opened a preliminary inquiry and the Chief and EAG concur in the staff's recommendation to grant early termination and to close the investigation, a memorandum should be e-mailed to the appropriate Special Assistant recommending early termination and closing. See supra Section C.7. Where time is critical, a conference call may be arranged. After the Director of Merger Enforcement closes the investigation, the Premerger Notification Unit/FTC Liaison Office will promptly relay the decision to grant early termination to the FTC. The Chief or staff must also submit an AMIS close form via e-mail to the Premerger Notification Unit/FTC Liaison Office by sending it to the AMIS mailbox.

(c) The procedures to be followed for granting early termination when requests for additional information have been issued, whether or not complied with, are exactly the same as those outlined in (b). Thus, staff should not withdraw the outstanding requests until the Division's Premerger Notification Unit/FTC Liaison Office has initiated the early termination procedures.

The FTC is responsible for notifying the parties that early termination has been granted by both agencies, even in situations where the investigation has been cleared to the Division. The FTC is also responsible for handling other procedural requirements, including Federal Register publication. Accordingly, if contacted by the parties, the staff should not advise them that the Division is willing to grant early termination, but rather should advise the parties to contact the FTC's Premerger Office (telephone (202)326-3100) for further information.

6. Request For Additional Information

Pursuant to Section 7A(e) of the Clayton Act, 15 U.S.C. § 18a(e), the Division or the FTC, but not both, may request additional information or documentary materials from any person required to file a notification (commonly referred to as a "Second Request") or from any officer, director, agent or employee of such person. A Second Request must be made prior to the expiration of the 30-day waiting period (or 15-day waiting period in the case of a cash tender offer or bankruptcy filing). A Second Request extends the waiting period before which the transaction may be consummated for thirty days (ten days in the case of a cash tender offer or an acquisition from a debtor in bankruptcy) from the time when both parties (or, in the case of any kind of tender offer or a bankruptcy transaction, the acquiring person) have substantially complied with the Request.⁽²⁶⁾ As discussed further below, the Division and FTC have agreed to a model Second Request schedule that increases consistency and reduces compliance burdens on parties. See infra Section D.3.b(i).

A Second Request is effective if it is received within the original waiting period by the party filing notification or if notice of the issuance of such request is given within the original waiting period to the person to which it is directed, provided the written request is mailed to that person within the initial waiting period (requests to individuals must be sent by certified or registered mail). Notice of issuance of the Second Request may be given by telephone or in person to the individual named in Item 1(g) of the filing and the schedule must be read to the recipient, if requested.⁽²⁷⁾ See 16 C.F.R. § 803.20. Foreign companies are required to name in Item 1(h) an individual designated to receive service of a Second Request. The original waiting period expires at 11:59 p.m. Eastern Time on the thirtieth (the fifteenth in case of a cash tender offer or acquisition from a debtor in bankruptcy) calendar day following the beginning of the waiting period.⁽²⁸⁾ See 16 C.F.R. § 803.10(b).

7. Other Provisions of the Act and the Rules

   1. Preliminary Injunction; Hearings

Section 7A(f) of the Clayton Act, 15 U.S.C. § 18a(f), provides that when the Division or the FTC files a motion for a preliminary injunction and certifies to the district court that the public interest requires relief pendente lite, the Chief Judge of such district shall immediately notify the Chief Judge of the Court of Appeals for that circuit who shall designate a district judge to whom the action is to be assigned for all purposes.

2. Enforcement of the Act

Section 7A(g)(1) and (g)(2) of the Clayton Act, 15 U.S.C. § 18a(g)(1)-(2), provide the enforcement mechanism for the Act. Under § 7A(g)(1), any person (or any officer, director or partner thereof) who fails to comply with any provision of the Act may be liable for a civil penalty of up to $11,000⁽²⁹⁾ for each day during which such person is in violation of the Act. A 1991 Memorandum of Agreement between the Department of Justice and the FTC, for the purpose of promoting efficient and effective handling of civil penalty actions, provides that when the FTC requests that the Department of Justice bring a HSR civil penalty action, FTC attorneys may be appointed as Special Attorneys, under the supervision and control of the Attorney General.

Under § 7A(g)(2), 15 U.S.C. § 18a(g)(2), either enforcement agency can seek injunctive relief if there has not been substantial compliance with the notification requirements of the Act and the Rules or with a Second Request. Under this section, the district court may order compliance and "shall extend the waiting period . . . until there has been substantial compliance." (The Act contains one exception: where a person whose stock is sought to be acquired by means of a tender offer (either cash or non-cash) has not substantially complied, the waiting period may not be extended.) Section 7A(g)(2)(C), 15 U.S.C. § 18a(g)(2)(C), also authorizes the court to "grant such other equitable relief as the court in its discretion determines necessary or appropriate."

3. Confidentiality of HSR Materials

Section 7A(h) of the Clayton Act, 15 U.S.C. § 18a(h), provides that HSR material ("[a]ny information or documentary material" filed with the Division or the FTC pursuant to the HSR Act) may not be made public except "as may be relevant to any administrative or judicial action or proceeding." The FTC and the Division interpret this provision to mean an administrative or judicial action or proceeding to which the FTC or the Department of Justice is a party. Thus, HSR material may be disclosed in a complaint, brief, motion, or other pleading filed in an action to which the Department is a party. HSR material may also be disclosed, pursuant to the statute, to Congress.

HSR material is expressly exempted from disclosure under the Freedom of Information Act. It may not be disclosed to state or foreign enforcement agencies or to third parties during depositions or interviews without the consent of the party producing the material. The Division has taken the position that it will not disclose HSR material to other federal agencies except the FTC itself. The confidentiality constraints apply not only to HSR information contained in HSR filings and Second Request responses, but also to the facts that an HSR filing has been made, a Second Request has been issued, and the date the waiting period expires.

Section 7A(h) has been interpreted by the two circuits that have addressed the issue as prohibiting the agencies from disclosing HSR information to state Attorney General offices. See Lieberman v. FTC, 771 F.2d 32 (2d Cir. 1985); Mattox v. FTC, 752 F.2d 116 (5th Cir. 1985). Mechanisms have been developed by the National Association of Attorneys General ("NAAG") and by the Division and FTC, that encourage parties in some instances to provide state enforcement officials with HSR materials and allow greater coordination between federal and state authorities investigating the same merger. NAAG's Voluntary Premerger Disclosure Compact allows parties voluntarily to file with a designated liaison state a copy of their initial HSR filings, and copies of Second Request schedules and production, in return for the Compact signatories agreeing not to serve their own compulsory process during the HSR waiting period.

To facilitate coordination of parallel federal and state merger investigations as much as possible within statutory constraints, the Department announced and implemented a revised Protocol in March 1992; the Protocol was revised in March 1998. By its terms, the Protocol applies where all acquiring and acquired persons in a transaction submit a letter to the Division that (1) agrees to provide the designated liaison state (as identified by the NAAG Compact) all information submitted to the Division under the HSR Act or pursuant to CIDs, and (2) waives the HSR and CID confidentiality provisions to the extent necessary to allow discussions of protected materials between the Division and the state Attorneys General. Where these requirements are met, the Division will provide the coordinating state copies of our Second Request and CID schedules and the HSR waiting period expiration date. The Protocol further states: "To the extent lawful, practicable and desirable in the circumstances of a particular case, the Antitrust Division . . . and the State Attorneys General will cooperate in analyzing the merger." See Chapter VII, Section C.5 (describing in more detail the relationship between the Division and state Attorneys General in merger investigations).

The staff may frequently receive requests for greater protection for HSR material than that provided by the statute. As a policy matter, the Division will not grant greater restrictions on our use of HSR material than that contained in the statute. An exception to this policy can only be made after consultation with the Section Chief, FOIA, and the Director of Merger Enforcement.

The Division's policy is to try to give a submitter 10 days notice, whenever possible, before placing HSR material on the public record in any administrative or judicial action or proceeding, regardless of whether the submitter is a party. Exceptions to this policy may be authorized by the Assistant Attorney General, especially in cases where 10 days' notice is not feasible, for example, where a temporary restraining order is being sought or where documents are attached to initial motion papers. Use of HSR material during litigation should be governed by a court ordered protective order.⁽³⁰⁾

In contrast to the Antitrust Civil Process Act, which expressly permits CID material to be used by the Division in connection with the taking of oral testimony pursuant to CID, see 15 U.S.C. § 1313(c)(2), Section 7A does not expressly authorize the use of HSR material in CID depositions. Thus, use of HSR material at depositions is governed by Section 7A's requirement that no such information or documentary material "may be made public." Accordingly, HSR material produced by a party should not be shown to another party or third-party during a CID deposition or otherwise.

4. Relationship of Premerger Notification to Other Statutes

Section 7A(i), 15 U.S.C. § 18a(i), contains two important explanations of the relationship between the Act and other activities of the Division and the FTC. Under § 7A(i)(1), any action by either agency or any failure of either agency to take any action under the premerger notification legislation has no effect on any proceeding under any other provision of the HSR Act of any other provision of law. This means, for example, that the Division may challenge a transaction even if the waiting period has expired or if the Division has early terminated the waiting period. Moreover, under § 7A(i)(2), the ability of the enforcement agencies to make full use of the Antitrust Civil Process Act, the Federal Trade Commission Act, and any other provision of law "to secure at any time from any person documentary material, oral testimony, or other information" is not affected by the premerger notification requirements.

2. Reviewing Premerger Filings
   1. Procedures For Getting Premerger Filings to the Staff for Review

The HSR Act requires parties to notify the Federal Trade Commission and the Department of Justice of certain proposed transactions. Three copies of the premerger notification form (and one set of attachments) must be submitted to the Division's Premerger Notification Unit/FTC Liaison Office and an additional two copies (and one set of attachments) must be submitted to the FTC. The filings are date stamped and immediately logged in. The FTC's Premerger Office assigns a premerger number to the transaction and computes the original waiting period. This information is immediately available to the Division through a direct link to the FTC's computer database. The Division's Premerger Notification Unit/FTC Liaison Office assigns the filing to the appropriate section based on the commodities involved in the transaction and the location of the parties. One copy of the filings with attachments is sent to the appropriate section for review and a copy of the filings without the attachments is sent to the Economic Analysis Group. The Premerger Notification Unit/FTC Liaison Office attaches to the filing a cover sheet that identifies the parties and when each filed, the premerger number, the date by which the section, task force, or field office needs to complete its initial review (the "section Chief's response due" date) and when the waiting period expires.

2. Substantive Review of the Filing

Generally, staff should, within five business days of receipt of a HSR filing (three days for a cash tender offer or bankruptcy filing), decide whether the filing raises competitive issues that need to be investigated. The primary basis for this determination is the HSR form and its attachments, although a large number of other sources of information are also available

1. Contents of the Form

The Notification and Report Form appears as an appendix to Part 803 of the Rules. It is designed to provide the enforcement agencies with the information needed for an initial evaluation of any competitive impact of a proposed acquisition. The following information is requested by the form:

General background about the parties and the transaction is found in Items 1-3. Item 1 identifies what type of transaction is being reported and in what capacity the reporting person is reporting (e.g., as an acquiring person, as an acquired person, etc.). Items 2 and 3 identify all other parties to the transaction and require a description of the assets and/or securities to be acquired. Also required are disclosure of the proposed consummation date and submission of certain documents constituting the agreement.

The form requires parties to report sales by each appropriate Standard Industrial Classification ("SIC") number.⁽³¹⁾ Item 5 requires submission of revenue data on a 4, 5, and 7-digit SIC basis. Four-digit data are sought for a base year (currently 1992). More detailed 7-digit product data for the base year are also submitted. These 7-digit data must be updated to reflect added or deleted products. Five-digit data for manufacturing industries are sought for the most recent year. In non-manufacturing industries, only 4-digit data from the most recent year are provided.

Staff should identify all 4, 5 and 7 digit overlaps and determine market shares using census data, which are available from the Antitrust Library. Census data show the number of companies and total sales for most SIC codes. When reviewing SIC information, staff should be aware that the classifications are not intended to track antitrust product markets. SICs can be used as an initial proxy for markets, but are often either too broad or too narrow. In reviewing SIC data, staff should keep in mind that while a domestic manufacturer will report sales under a manufacturing SIC (with codes that start with 2, 3 or 4), firms that make products abroad and sell them in the United States through sales offices or agents typically report their sales under a wholesaling SIC code. The result is that two firms can be each others' primary competitors even though the HSR form shows no SIC overlap. In addition, SIC categories are not always clear and some businesses may legitimately be placed in more than one category.

The limitations of SIC categories require staff always to review Item 4 documents that accompany the HSR form, even when the form does not reveal any SIC code overlap. Item 4 requires the reporting person to furnish copies of a variety of documents. Item 4(a) seeks a number of Securities and Exchange Commission documents including proxy statements, 10-Ks, 10-Qs, 8-Ks, and registration statements. Item 4(b) requires submission of annual reports, annual audit statements, and balance sheets. Item 4(c) asks for studies, surveys, analyses, and reports prepared by or for officers or directors for the purpose of evaluating or analyzing the acquisition with respect to various aspects of competition. Documents produced in response to Item 4(c) may include, for example, board of director presentations and offering memoranda created to find a purchaser for the acquired firm. These 4(c) documents contain the firms' own analyses of the affected markets and the benefits they perceive from the proposed acquisition. Parties are not required to translate Item 4 documents, but are required to submit English language outlines, summaries or translations that already exist. See 16 C.F.R. § 803.8(a).

Item 6 seeks information on significant (but less than controlling) shareholders and shareholdings of the reporting person.

Item 7 requires submission of geographic market data for transactions where 4-digit industry overlaps exist. This is important when reviewing industries characterized by local or regional markets.

Item 8 seeks merger history data where 4-digit SIC code overlaps exist.

In response to items 5, 7, and 8, information need be supplied only with respect to operations conducted in the United States. See 16 C.F.R. § 803.2(c).

2. Other Sources of Information

If a review of the HSR form and attachments raises competitive issues, staff should conduct a search of publicly available information to decide whether an investigation should be opened. These sources include, among others, on-line searches of articles about the relevant industries and companies and press accounts of the proposed transaction, an examination of Internet sources, such as company home-pages, and standard reference books kept in the Antitrust Division Library.

3. Assessing the Completeness of the Filing

In addition to substantively reviewing every HSR filing, staff should ensure that HSR filings are complete. When an HSR filing is incomplete or inaccurate, the FTC has the responsibility of notifying the parties. The FTC will require that the parties submit a corrected filing and file a new certification that the filing is complete. In those cases where the deficiency is significant, the waiting period will begin when the corrected filing is resubmitted. The FTC must inform parties of filing deficiencies promptly after the deficiency is discovered, but a filing can be rejected (or "bounced") whenever a deficiency is discovered, even if Second Requests have been issued and responses to the Second Request have been produced by the parties. The attorney reviewing the filing should promptly contact the FTC Premerger Notification Office and the Division's Legal Policy Section about any questions regarding the accuracy or completeness of a filing. If, for example, Second Request or voluntarily produced documents include documents that should have been submitted with the initial filing pursuant to Item 4(c), the Legal Policy Section and the FTC Premerger Notification Office should be promptly informed.

4. Recommendation to Open or Not Open an Investigation

Once an HSR filing has been assessed for completeness and substantively reviewed, staff should determine whether the proposed transaction poses no likely competitive harm or whether it raises questions sufficiently serious to warrant a preliminary inquiry. All decisions to recommend the opening of a preliminary inquiry and all close decisions not to do so should be discussed with the appropriate section Chief or Assistant Chief before the recommendation is made.

1. The No-Interest Memorandum

When staff decides that a transaction does not warrant investigation, staff must fill out a "No-Interest" form. The form is found as a interactive macro in Word Perfect. The form records information such as the identity of the parties, the HSR transaction number, SIC codes, product and geographic overlaps and a summary of the transaction. In the "Comments" section, staff should explain why it recommends that no investigation be initiated. The form should be sent electronically to the reviewing official, usually the Chief or Assistant Chief. If the reviewer concurs in the recommendation, he/she will sign off on the recommendation using an "Approval" macro and will electronically inform the Division's Premerger Notification Unit/FTC Liaison Office.

2. Opening a Preliminary Inquiry

A staff decision to seek preliminary inquiry authority should be discussed with the Chief of the appropriate legal section before being drafted. When a section decides to seek a preliminary inquiry, staff should draft a PI Request Memo using the "Request For PI Authority" macro. See supra, Section B.2. Both the staff and the Chief of the legal section should ordinarily consult with the economist assigned to the matter before seeking PI authority. After the section Chief reviews the memorandum and approves it, the section will send it to the Premerger Notification Unit/FTC Liaison Office by e-mailing it to the "PI Request" mailbox and the Special Assistant responsible for the component. The recommendation will be reviewed and clearance will be sought from the FTC to open the investigation.

5. Clearance Procedure

Since the Federal Trade Commission and the Department of Justice share enforcement responsibility for mergers and acquisitions, the two agencies have developed a clearance process to allocate responsibility between themselves for reviewing each proposed transaction. Only the agency with clearance may issue a Second Request. To trigger the clearance process at the Division, the section reviewing the transaction must submit to the Premerger Notification Unit/FTC Liaison Office a request to conduct a preliminary inquiry (the "PI Request Memo"). The PI Request Memo form is available as a computer macro: it requires background information about the parties, the commodity involved, the nature of the possible violation, and a brief description of why preliminary inquiry authority is necessary.

The Department and the Commission have agreed to a clearance process in mergers based primarily on past experience and expertise. To ensure speedy clearance, the Department and the Commission have established a deadline of nine business days from the date of notification to decide which agency will have responsibility for investigating a transaction. A cash tender offer or a bankruptcy clearance request will be resolved in seven days.

The process begins with the transmittal of a clearance request, which is an electronic form that lists the clearance number, the parties and the conduct being investigated, the geographic area, the premerger number and the end of the waiting period. If clearance is contested, written claims justifying each agency's right to investigate the matter will be exchanged, usually within one day after the matter becomes contested. The claims form should list each previous investigation or case claimed as expertise with a priority given to those matters handled within the past 5 years, identify how the matter relates to the transaction at issue, list any party expertise and indicate whether the investigation was "substantial" (in this context, substantial means the use of compulsory discovery). In compiling a claim, staff should request the Division's Premerger Notification Unit/FTC Liaison Office to conduct a search for all Division matters involving the contested parties and SIC codes. Clearance is granted to the agency with the stronger claim. (For more details on the clearance process, see Chapter VII, Section A.1.)

6. Preclearance Contracts with the Parties

Parties often request the opportunity to meet with the Division or to provide written information or analysis before clearance is resolved in order to assist the clearance process or to make better use of the initial review period. The Division and the FTC have agreed to a preclearance contacts policy which provides that if the parties do not initiate contact with the staff, the Agencies will not initiate contact with the parties without first notifying the other agency and offering the other agency the opportunity to participate. If a party initiates contact, the contacted agency will advise the party that clearance has not been resolved and that any information should be provided simultaneously to both agencies. If a preclearance meeting is deemed appropriate, the contacted agency will coordinate with the other agency to offer the requesting party a joint meeting with both agencies. If a party initiating the contact asks the staff if it has any questions, the contacted agency should tell the party that clearance has not been resolved. The contacted agency may ask follow-up questions, but any written information provided in response to these questions should be submitted simultaneously to both agencies.

7. Maintaining the Filings

The Division takes the position that it may maintain HSR filings for future investigations. Each component has been directed to establish its own system of retaining HSR filings and periodically destroying filings that are no longer of interest to the section. Each document that is retained because it may be useful in future investigations should be kept with a cover sheet that identifies the party that submitted the documents and makes clear that they are protected from disclosure under the Act.

3. Merger Investigation Overview

   1. The Preliminary Inquiry

The first phase of a merger investigation commences when FTC clearance has been granted and the staff has been granted PI authority. Staff should use this period to determine whether the proposed transaction raises issues substantial enough to warrant the issuance of a Second Request. To this end, when PI authority is obtained, staffs should outline their provisional theory of anticompetitive harm and should begin contacting customers, trade associations, competitors and other relevant parties to determine whether there are likely competitive concerns in any relevant markets. The Premerger Notification Rules do not foreclose the Division from employing other investigative resources, such as Civil Investigative Demands, during the course of the merger investigation.

Chapter VI describes the other resources available to the staff investigating a merger. It should be noted, however, that the economists from the Economic Analysis Group are important members of the investigative team. In addition, in cases where divestiture is considered a possible remedy or where efficiencies or "failing company" issues may be present, the Division's Corporate Finance Unit of the Economic Litigation Section should be advised at the earliest possible time.

The attorney(s) assigned to the matter should also contact the parties to discuss possible competitive concerns. The HSR Rules specifically provide for the enforcement agencies to request amplification or clarification of the information in the initial filing. Such requests are informal and voluntary, and they do not extend the waiting period or affect the Division's right to make a Second Request. In fact, staff is encouraged to make such requests, since a clarification or amplification could help in determining that the Division has no interest in the transaction. After clearance has been received, the attorney should request that the parties voluntarily provide information such as customer lists, most recent bids, and most recent strategic and marketing plans. This information is extremely useful in deciding whether to issue a Second Request. The Division deems such voluntarily provided information as coming within the confidentiality protections of section 7A(h) of the Clayton Act, 15 U.S.C. § 18a(h). See supra Section D.1.g(iii). Care should be taken, however, to inform the parties that the voluntary request is not a formal Second Request.

2. Second Request Authority

If the staff concludes that a transaction might raise competitive problems and more information is needed to evaluate it, the staff should draft a Second Request, and obtain approval to issue it before the expiration of the applicable waiting period. The authority to make a Second Request has been delegated by the Assistant Attorney General to the Director of Merger Enforcement. A recommendation to make a Second Request should be e-mailed to the appropriate Special Assistant two full business days before the initial waiting period is due to expire. The recommendation should include a brief memorandum recommending a Second Request,⁽³²⁾ Second Request letters to the parties and the schedules setting forth the documents and information being sought. Since a Second Request may have substantial consequences for the parties to the transaction, staff should carefully assess the need for and scope of the request.

1. Model Second Request

The Division and the FTC have agreed to a model Second Request schedule that increases consistency between the Agencies and reduces compliance burdens on the parties. The model Second Request is widely available and may be found in the Division Work Product Document Bank. Staff, in consultation with EAG, may modify the model Second Request to delete requests that are unnecessary or to obtain additional documents or information necessary to review and possibly challenge the transaction.

2. The Second Request Letter

The Second Request letter is typically addressed to the entity that filed the HSR filing⁽³³⁾ and should read as follows:

Pursuant to Section 7A(e)(1) of the Clayton Act, 15 U.S.C. § 18a, and Section 803.20 of the Premerger Notification Rules and Regulations, 16 C.F.R. § 803.20, the Antitrust Division requests additional information and documents relevant to the proposed acquisition [merger] of ____________ by [with] ____________. As provided by 15 U.S.C. § 18a(e)(2), and 16 C.F.R. § 803.20, this second request for information extends the waiting period, during which this proposed transaction may not be consummated, for 30 days [ten days] from the date of receipt by the Antitrust Division of all materials requested herein.⁽³⁴⁾ The requests for additional information and documents are contained in the enclosed Schedule.

To comply with this request, deliver the materials by hand or by registered or certified mail to the __________ Section, Antitrust Division, Department of Justice, [address], Washington, D.C. 20530. You are also required to submit a certification attesting to the completeness of your response in accordance with Section 803.6 of the Premerger Notification Rules. Deliver the certificate to the above address and a copy to the Department of Justice, Antitrust Division, Premerger Notification Unit, Patrick Henry Building, 601 D St. NW, Room 10-013, Washington, D.C. 20530.

If you have any questions regarding this request, please contact [name of lead attorney] at [telephone number].

Sincerely, Director of Merger Enforcement Antitrust Division

3. Negotiating Modifications

Parties receiving Second Requests are encouraged to contact the staff to negotiate limitations or modifications to the Second Request. In considering requests for modifications, the staff should consider the competitive issues involved, the manner in which information and documents are maintained by the parties, the type of information available to the parties, and the relative burdens to the parties of producing the requested information. Staff must respond to all requested modifications in writing within five business days.⁽³⁵⁾

If any issues arise in the course of modification discussions with the staff, the parties should contact the Chief or Assistant Chief to discuss the matter. Such discussions with the Chief or Assistant Chief are relatively common during the second request modification process. In the event that any issue cannot be resolved at the section level, the Division has adopted an internal appeals process for requested modifications to a Second Request. This process provides for the party seeking modifications to appeal the Chief's decision to a senior official who does not have direct responsibility for the review of any enforcement recommendation in the matter. Typically, this will be a Deputy Assistant Attorney General not involved in the decision-making process of the case. Staff should contact the appropriate Special Assistant to determine which official will handle the appeal. The appeal should be in writing and no more than 10 pages long. It should include a concise explanation of the reasons why further compliance would be unduly burdensome and a summary of compliance discussions with the staff and Chief. The Reviewer may request additional information within two business days of receipt of the appeal and will render a decision on the appeal within seven business days after receipt of all necessary information.

4. Compliance with the Second Request

The staff attorneys conducting the investigation are responsible for ensuring that the parties have complied with the Second Request. Clear instructions should be given as to where the response should be sent. Second Request responses delivered after 5 p.m. Eastern Time on a regular business day, or at any time on any day other that a regular business day, shall be deemed received on the next regular business day. Delivery is effected on the last day when all the requested material is received and the parties have certified compliance with the Second Request. Section 803.3 of the Rules requires that a complete response be supplied to any request for additional information. See 16 C.F.R. § 803.3. If a party is unable to supply a complete response, it should provide a statement of the reasons for noncompliance.

The staff should determine whether the parties are in substantial compliance with the Second Request as soon as possible (generally well before the expiration of the second statutory waiting period, even if there is a timing agreement extending the waiting period or otherwise committing the parties to delay the closing). If the parties are in substantial compliance, the staff should inform the parties and confirm the date that the waiting period will expire. If the submission is not in substantial compliance, a deficiency letter should be prepared. This letter should specify the areas in which the submission is deficient and that the parties failed to provide an explanation for non-compliance. The deficiency letter may be issued over the signature of the Chief, but the parties may appeal the Chief's decision to a senior official who does not have direct responsibility for the review of any enforcement recommendation in the matter. Typically, this will be a Deputy Assistant Attorney General not involved in the decision-making process of the case. Staff should contact the appropriate Special Assistant to determine which official will handle the appeal. As with disputes over modifications, the appeal should be in writing and no longer than ten pages. It should include a concise explanation of the reasons why the party believes it is in compliance and a summary of the discussions with the staff and Chief. The Reviewer may request additional information within two business days and must render a decision on the appeal within three business days after receipt of all necessary information.

3. After the Second Request Is Issued

In the period between the issuance of the Second Request and substantial compliance by the parties, staff should conduct a thorough investigation that will allow them to decide whether a transaction is anticompetitive and should be challenged in court. Shortly after the issuance of a second request, staff must offer to engage in a "second request conference" with each party to discuss the competitive concerns that exist at that stage in the investigation. Staff must schedule any such conference within five days of the issuance of the second request, unless the merging parties seek a later date. If at any time the staff believes that a transaction is not likely to adversely affect competition, it may recommend that the investigation be closed. In certain investigations, when staff believes that the resolution of discrete issues through the examination of limited additional information could be sufficient to satisfy the Division that the transaction is not anticompetitive, the staff may arrange a "quick look" investigation. In a "quick look" investigation the parties refrain from complying fully with the Second Request and instead provide limited documents and information and the staff commits to tell the parties, by a particular date, whether full compliance will be necessary. In other investigations, it will be clear from the onset that the transaction raises serious issues that can only likely be resolved after a full investigation and compliance with the Second Request.

A full Second Request investigation typically will include: issuing CIDs to third parties to obtain information necessary to compute market shares and documents necessary to assess the relevant markets and competitive significance of the transaction; taking depositions and obtaining statements for use in court; retaining and working with experts; conducting legal research; complete preparation for reviewing Second Request documents and use of litigation support systems; and ensuring the preparation of economic and other evidence on the competitive effects of the transaction.

Because much has to be accomplished in a limited time period, the legal and economic staff should carefully develop a comprehensive plan for conducting the investigation. The plan should include who is responsible for implementing each part of the plan and when the task is to be accomplished. The focus should be on bringing the most persuasive evidence to bear on the issues of the investigation and include the appropriate use of discovery tools. One or more meetings are generally held with the Director of Merger Enforcement and appropriate Deputy Assistant Attorney General to discuss the case plan, case theory, and progress of the investigation.

Because parties may want more time than the waiting periods in the Act allow to discuss fully the competitive significance of transactions with the section, the Director of Merger Enforcement, the appropriate Deputy Assistant Attorney General, and the Assistant Attorney General, in appropriate cases the staff may, in consultation with the Chief and the Director of Merger Enforcement, negotiate timing agreements to allow for the orderly review of information and dialogue on the competitive significance of a transaction. In these agreements, the parties typically promise not to close the transaction for some period of the time after the expiration of the waiting period. The form of these agreements appropriately varies from transaction to transaction. The agreement should not commit the Director of Merger Enforcement, the appropriate Deputy Assistant Attorney General, or the Assistant Attorney General to meet with the parties or to decide on a challenge by any particular date without consultation with the Director of Merger Enforcement.

4. After the Parties Are in Substantial Compliance

Once the parties are in substantial compliance, see supra Section D.3.b(iv), the waiting period ends after 30 days, or 10 days in the case of a cash tender offer or bankruptcy filing. Unless the parties have committed not to close the transaction as part of a timing agreement, the Division must make a decision on whether to challenge the transaction and seek preliminary relief to prevent the transaction from closing.

After the parties have responded to a Second Request and certified that they are in substantial compliance, staff needs to carefully review the submission substantively, assess the completeness of the submission and whether a deficiency letter should be issued, finish any depositions that remain to be taken, and forward a recommendation and, if applicable, a revised order of proof as well as any proposed pleadings, to the Director of Merger Enforcement. A recommendation to close the investigation should include a request to early terminate the waiting period. See supra Section D.1.e.

5. Procedures for Recommending Suit

While the Second Request materials are being reviewed and all CID or voluntary request materials are being compiled, staff should assess the possibility of challenging the acquisition. If it appears likely that the staff will recommend challenging the acquisition prior to consummation, it should prepare the order of proof, evidentiary attachments and proposed pleadings at the earliest point practicable. Staff should prepare affidavits and exhibits as it completes its investigation. When the staff plans to accompany its motion papers, if suit is brought, with a declaration from an economist, the testifying economist assigned to the case should begin to prepare an declaration and accompanying exhibits. The legal basis for challenges to acquisitions prior to consummation is set forth in detail in Chapter IV, Section B, and that analysis should assist the staff in preparing the necessary papers. The Work Product Document Bank may be consulted for sources of specific pleadings filed in other matters.

Because of the time constraints placed on the staff by the HSR Act and Premerger Notification Rules, the Director of Merger Enforcement should be informed as soon as the staff believes a recommendation to file suit is likely. Staff should also coordinate with the Appellate Section, as their assistance may be useful in the event that it becomes necessary to seek a temporary restraining order or preliminary injunction. For more information on recommending a merger case, see infra Section G.2.b.

In the event that staff believes a challenge is not warranted, staff should prepare a closing memo detailing the reasons. The concurrence of the