1

1	INTERNATIONAL COMPETITION POLICY ADVISORY COMMITTEE
2	HEARINGS
3
4
5
6	Washington, D.C.
7	April 22, 1999
8
9
10
11
12
13	This document constitutes accurate minutes of the
14	meeting held April 22, 1999 by the International
15	Competition Policy Advisory Committee. It has been
16	edited for transcription errors.
17
18
19	James F. Rill Paula Stern
20	Co-Chair Co-Chair
21
22
23

2

1	INTERNATIONAL COMPETITION POLICY ADVISORY COMMITTEE
2	HEARINGS
3
4
5
6	Washington, D.C.
7	April 22, 1999
8
9
10
11
12
13
14	Taken at the Center for Strategic and International Studies, 1800 K
15	Street, N.W., B-1 Conference Center, Washington, D.C., beginning at 9:00
16	A.M., before Ann Marie Federico, a court reporter and notary public in and for
17	the District of Columbia.
18
19
20
21
22
23

3

1	APPEARANCES
2	Advisory Committee Members:
3	James F. Rill,  Co-Chair and Senior Partner, Collier, Shannon, Rill & Scott,
4	PLLC
5	Paula Stern,  Co-Chair and President, The Stern Group, Inc.
6	Merit E. Janow,  Executive Director and Professor in the Practice of
7	International Trade, School of International and Public Affairs,
8	Columbia University
9	Thomas E. Donilon, Partner, O'Melveny & Myers
10	John T. Dunlop, Lamont University Professor, Emeritus, Harvard
11	University
12	Eleanor M. Fox,Walter Derenberg Professor of Trade Regulation,
13	New York University School of Law
14	Department of Justice Employees:
15	Joel I. Klein,  Assistant Attorney General, Antitrust Division
16	Other:
17	Debra Valentine, General Counsel, Federal Trade Commission
18	Members of the Public Appearing before the Advisory Committee and Presenting Written or
19	Oral Statements:
20	Panelists: Confidential Information Sharing:
21	Klaus F. Becher, Associate General Counsel, DaimlerChrysler AG
22	A. Neil Campbell, McMillan Binch
23	Janet L. McDavid, Hogan & Hartson LLP

4

1	Panelists: Confidential Information Sharing (cont'd.)
2	Phillip A. Proger, Jones, Day, Reavis & Pogue
3	Panelists: Representatives of Trade Associations:
4	American Forest & Paper Association - Maureen R. Smith, Vice President,
5	International
6	The Business Roundtable - Robert C. Weinbaum, Assistant General Counsel,
7	General Motors Corporation ; Thomas B. Leary, Hogan & Hartson, LLP
8	National Association of Manufacturers - Stephen Bolerjack, Counsel,
9	Antitrust and Trade Regulation, Ford Motor Company
10	U.S. Chamber of Commerce - William Blumenthal, King & Spalding
11	U.S. Council for International Business - Thomas M. T. Niles, President
12	Panelists: The Role of International Institutions in Competition Policy:
13	Joe Phillips, Organization for Economic Cooperation and Development
14	Mark A. A. Warner, Organization for Economic Cooperation and
15	Development
16	Panelists: The International Antitrust Law Committee of the ABA Section of
17	International Law and Practice:
18	Donald I. Baker, Baker & Miller PLLC
19	Michael H. Byowitz, Wachtell, Lipton, Rosen & Katz
20	Paul S. Crampton, Davies, Ward & Beck
21	Daryl A. Libow, Sullivan & Cromwell
22
23

5

1	IN ATTENDANCE:
2	Advisory Committee Staff:
3	Cynthia R. Lewis, Counsel
4	Andrew J. Shapiro, Counsel
5	Stephanie G. Victor, Counsel
6	Eric J. Weiner, Paralegal
7	Estimated number of members of the public in attendance: 30
8	Reports or Other Documents Received, Issued, or Approved by the Advisory
9	Committee:
10	International Bar Association Exchanges of Confidential Information
11	Between Antitrust Enforcement Agencies, Preliminary Observations
12	Prepared by a Working Group of the Antitrust and Trade Committee
13	of the International Bar Association
14	International Chamber of Commerce ICC recommendations to the
15	International Competition Policy Advisory Committee (ICPAC) on
16	exchange of confidential information between competition authorities in
17	the merger context, prepared by the Commission on Law and Practices
18	Relating to Competition
19	American Forest & Paper Association Presentation by Maureen R. Smith,
20	Vice President, International, American Forest & Paper Association
21	The Business Roundtable Statement of Robert C. Weinbaum, Office of
22	General Counsel, General Motors Corporation, on behalf of The
23	Business Roundtable Task Forces on International Trade and Investment

6

1	and on Government Regulation
2	National Association of Manufacturers Testimony of Stephen D. Bolerjack,
3	Counsel, Antitrust and Trade Regulation, Ford Motor Company, on
4	behalf of the National Association of Manufacturers
5	U.S. Chamber of Commerce Comments of the U.S. Chamber of Commerce
6	United States Council for International Business Comments of the United
7	States Council for International Business (USCIB) on International
8	Competition Issues to the International Competition Policy Advisory
9	Committee, May 27, 1999; Preliminary Comments (Oral Statement) of
10	Ambassador Thomas M. T. Niles, President, USCIB
11	OECD Speech by Joanna R. Shelton, Deputy Secretary-General, OECD,
12	"Competition Policy: What Chance for International Rules?" (Nov. 25,
13	1998), submitted by Bernard Phillips
14	ABA Section of International Law and Practice presentation by Members of
15	the International Antitrust Law Committee (Don Baker, Mike Byowitz,
16	Paul Crampton and Daryl Libow)
17
18
19
20
21
22
23

7

1	PROCEEDINGS
2	MR. RILL: Let me welcome everyone to the April 22 hearings
3	of the International Competition Policy Advisory Committee and express my
4	thanks to those of you who will be appearing today, and to the press and others
5	in the audience. This is actually the second wave of hearings. We also had a
6	hearing scheduled for tomorrow but were ousted by the crowds of the 50th
7	anniversary of the North Atlantic Treaty Organization. A few of us in the
8	room remember when that was signed.
9	The Committee's hearings today were really prompted by a
10	number of very thoughtful papers and views that have been presented to us.
11	Also, they have been prompted by exchanges at the last hearings -- those
12	hearings took place in November and focused on a variety of issues that are
13	going to be discussed and illuminated today.
14	Today's hearings will progress with four separate sessions.
15	Session 1 on confidential information sharing; Session 2 on presentations by
16	various representatives of trade associations which have been particularly
17	knowledgeable and interested in the work of the Advisory Committee; Session
18	3, which now has become basically an OECD session -- we at our November
19	hearings had participation by a number of governments interested in the
20	merger, trade and competition and enforcement cooperation areas. Today we
21	will hear from two representatives of OECD -- representing 29 governments --
22	and finally Session 4, a presentation by the representatives of the International
23	Law and Practice Committee of the American Bar Association, which has met

8

1	with us on a couple of occasions and done a great deal of work in this area.
2	Before recognizing the first panel, I would like to acknowledge
3	the Committee members who are present: John Dunlop, Eleanor Fox, and my
4	Co-Chair, Paula Stern, and our erudite and extraordinarily competent leader,
5	Executive Director Merit Janow.
6	Again, before recognizing the first panel, I would like to call on
7	Paula for any introductory comments she may have and then turn it over to
8	Assistant Attorney General Klein, who is the father of this effort.
9	DR. STERN: I would like to just second the welcome to
10	everybody, particularly those who have come from so very far, and say that we
11	are closing in on a number of the issues. We feel we have made an enormous
12	amount of progress thanks to the input of individuals like yourselves. Your
13	individual input has been extremely valuable and I am looking forward to a
14	very fruitful day, and of course on May 17th we will resume the hearings that
15	we have postponed that had been scheduled for tomorrow. And I am now
16	looking forward to hearing from the father of the Committee, Joel Klein.
17	MR. KLEIN: Thank you. It's often been said that victory has
18	many parents and defeat is an orphan. I am happy to have sired this enterprise.
19	I hope I feel that way on the day the final report comes out. For the time
20	being, actually this really was the Attorney General's ultimate decision and she
21	deserves a great deal of credit, because I am sure there were a number of
22	people out there who said to her as they said to me: Well, why would you
23	unleash at least a dozen people who are not in your employ, and who are

9

1	independent and tough-minded people with a lot of knowledge and background
2	in this area to go out and make a report that will tell the Department all sorts
3	of things that it ought to be doing with respect to international antitrust
4	enforcement?
5	I think it reflects, truly, her sense of security and her willingness
6	to reach out to some of the finest, most talented people in the field to bring in
7	recommendations in an area in which, frankly, there are not easy and obvious
8	answers. And I think it's not typical in government to go out and put this much
9	responsibility and this much power, frankly, in the hands of an advisory
10	committee.
11	Everything I have seen about the process confirms to me that the
12	judgment that the Attorney General made was right. The hearings that were
13	held last fall, I think, were really landmark hearings. The bound transcript
14	that's come out of that is a document in and of itself worthy of careful
15	attention and study. And I anticipate the report we're going to get later this
16	year from this Committee is going to be really a true landmark report in the
17	issues of globalization of antitrust enforcement, and the intersection of trade
18	and competition policy.
19	Let me tell you, it could not come at a more timely point in our
20	history. Even as the Committee does its work, this area keeps growing and
21	exploding. You wake up this morning and you see the proposed merger
22	between Deutsche Telekom and Telecom Italia. And that is simply a harbinger
23	of what we are going to see in the next five to ten years. People who do not

10

1	think we are going to see a spectacular increase in global mergers along the
2	lines of these $50-$100 billion-plus deals in the next four to five years should
3	not be allowed to go online by themselves during day trading.
4	(Laughter)
5	This is as obvious as it is compelling. It's going to raise some
6	very, very complicated issues. I am sure, as we sit here now, people
7	throughout the world are thinking about the implications of this particular
8	merger and, indeed, what it does to the ongoing relationships between Sprint
9	and Deutsche Telekom, and France Telecom, a transaction that the Division
10	actually reviewed and conditioned when it originally took place.
11	Beyond this merger boom that we currently see and will continue
12	to see, I cannot tell you because it's confidential, but I can indicate something
13	about the nature of the Division's work in cartel enforcement, international
14	cartel enforcement. Again, this reflects truly a sea change in antitrust
15	enforcement. The nations of the world have come several standard deviations
16	in terms of their levels of cooperation between what we saw in 1993 and '94,
17	when we did the DeBeers/GE cartel case, to what we're seeing now. And it's
18	frequently been reported that we have somewhere around 30 active grand juries
19	looking into international cartels. What's not as well known is the magnitude
20	of the volumes of commerce that are affected by these price-fixed industries.
21	And for those of you who often hear in academic debates
22	questions about whether there is a need or not a need for antitrust enforcement,
23	the fact that this could be debated anywhere proves to me that there is not

11

1	enough reports going on in the academies. But when you think about this and
2	look at the fact that, with effective global worldwide antitrust enforcement,
3	there are at a minimum, I believe, 20 or 30 huge ongoing international cartel
4	conspiracies that are taking, I believe, billions of dollars annually out of the
5	U.S. economy, the need to be as effective in the international setting as we are
6	in the domestic setting is absolutely critical. And the work of this Committee
7	will obviously have an impact on that as well.
8	And finally, it could hardly be more timely in terms of the issues
9	at the intersection of trade and competition policy -- which I will tell you are
10	some of the most difficult and sensitive issues both in terms of thinking
11	through the policy and, indeed, of thinking through the politics. And I will
12	look forward to the report of the Committee in that respect.
13	In the meantime, we have now got actually our first at least
14	partial result of our first positive comity referral on the computer reservation
15	system that we referred to Europe -- to DG-IV -- with respect to Sabre's
16	concerns about market access in Europe. At this point, DG-IV has issued a
17	statement of objections that is a kind of Notice of Proposed Finding of
18	Violation to Air France. In the meantime, Sabre has resolved its disputes in
19	terms of the private negotiations with respect to Lufthansa and SAS, all of
20	which suggest that positive comity can be and will be a modest but important
21	player in the issues at the intersection of trade and competition policy.
22	At the same time it's obviously essential, from our point of view,
23	that competition policy remain soundly based in key antitrust economic

12

1	principles and that the issues at the border of trade and competition policy not
2	be clouded in any way that undermines or erodes effective antitrust
3	enforcement. In that regard, we're looking toward the end of this year to
4	another round at the World Trade Organization. And while there will be a
5	wide variety, I'm sure, of different views, for the United States I think this is
6	really one time where the Goldilocks policy -- which is we don't want it to be
7	too cold or too hot -- is going to be a critical balance.
8	And what I mean by that is, I think it is very important that the
9	WTO keep a key oar as probably, in many respects, the most inclusive global
10	organization that will be looking at the range of issues at the intersection of
11	trade and competition. I think they have got to remain a key player in this
12	evolving process which I think we have to take a long-term view about. And at
13	the same time I don't think they are ready for dispute resolution. And so, what
14	I want to make sure is that we both continue to empower the WTO efforts in
15	this area while at the same time we don't prematurely reach some model of
16	dispute resolution or hard negotiations which could in the end do more harm
17	than good. So that will be a role that we will play, I believe, aggressively. Of
18	course, we will await the recommendations of this Advisory Committee as we
19	continue to refine our thinking in detail in all of these areas.
20	I just want to leave -- this is actually a little longer than I
21	typically do this, because last week I had to sit and listen while all these people
22	associated with the American Bar Association spoke at their annual Spring
23	meeting, so I figured this is my shot to make them sit and listen while I speak.

13

1	But none was more eloquent than Phil, who had to try to manage 2,000 people
2	who had, it seemed to me, each gone to about 2,000 cocktail parties before they
3	showed up. He handled it. He said, in one of the lines that will sort of live
4	forever, he said, "We're going to introduce the front table, and I would ask
5	only one thing, that you hold your applause until the end." And what
6	everybody on the front table said is, you should ask only one thing, "Would
7	you be kind enough at least to applaud?" I think you managed some success in
8	that.
9	But I close by telling you that, actually, I think as we move
10	forward, the need for the work of this Committee, the thoughtful engagement
11	that is likely to grow out of the enormously fine work that has occurred, is so
12	critical now that, whatever else, I will credit the Attorney General not just for
13	her foresight but for her brilliance in timing. Because this is the right time for
14	this report. Let me again thank you Jim, Paula, the members of the Committee,
15	and also Merit and the members of her staff, who have just done a terrific
16	amount of very, very good work. I am personally much in your debt and I'm
17	sure the Attorney General shares that as well. Thank you.
18	MR. RILL: Joel, thanks very much. We are personally very
19	much in your debt for the support and leadership you have given us, as well as
20	the resources that we have available to us, a truly superb staff. Cynthia
21	Lewis, Andrew Shapiro, and Stephanie Victor, who work tirelessly to develop
22	papers and think-pieces for our input. And also as a matter of my own
23	observation privilege, Sarah Bauers of our firm, who also has contributed an

14

1	enormous amount of time and insight into this project.
2	With that, we'll just turn to the first panel. At our last hearings
3	there was a great deal of discussion on the issues related to the sharing of
4	confidential information which is necessarily implicated in all of the subjects
5	that we're dealing with: mergers, trade and competition, and cartel enforcement
6	cooperation. And interest was expressed by the Committee members and by
7	the panelists in having a more detailed exploration of those issues. So today
8	we have representatives of three organizations that volunteered, I will use that
9	term advisedly, to present papers and views on the issue of confidential
10	information.
11	The IBA group is represented by Neil Campbell, of McMillan
12	Binch in Toronto, an award-winning student, an award-winning professor, the
13	Rapporteur of the Global Forum, and if you don't know what that is, you need
14	to read some of his papers, which are truly excellent. Let me commend a
15	recent paper that was put out on international merger control, the recent book
16	that was put out on international merger control by the Global Forum.
17	The ICC, International Chamber of Commerce, will be
18	represented by Klaus Becher, who is associate general counsel for
19	DaimlerChrysler. Klaus has been in the antitrust world for 15 years, is a
20	member of the ICC's Commission on Competition, and is head of a task force
21	of the International Chamber of Commerce that was put together to present
22	views to us on this subject.
23	The third presentation is a panel of the leadership of the

15

1	Antitrust Section of the American Bar Association. Let me emphasize that
2	today they're speaking for themselves based on their enormous expertise and
3	not expressing the view of the American Bar Association, the Antitrust
4	Section, and possibly their partners. But I can only say that having been
5	through the bureaucracy of the American Bar Association, we understand that
6	position fully and are delighted to have the views of such expert panelists.
7	Phil Proger, of Jones Day Reavis & Pogue, the current chair of
8	the Antitrust Section, and a longtime practitioner in antitrust, is one of our
9	panelists of ABA Antitrust Section leaders. And the other is Jan McDavid, of
10	Hogan & Hartson, who is the incoming chair of the ABA Section of Antitrust
11	Law. I'm privileged to have worked and known both of them as friends and
12	respected colleagues for more years than probably any of the three of us care
13	to think. But they bring to this panel a unique expertise in international
14	mergers, trade and competition, and enforcement issues.
15	So without introducing each, take the time you need to give us
16	your views and if it's agreeable we'll save the questions until all the panelists
17	are through. So, Neil, if we may start with you. Actually, Neil, I'll reverse
18	that for a minute because I understand Jan has to leave. You don't? Okay.
19	Then we'll save the questions to the end. And Neil, if we could have your
20	views, then go to Klaus and Phil and Jan.
21	MR. CAMPBELL: Jim, thank you very much for the kind
22	introduction. And good morning to you, and all the Committee members and
23	guests. It's a great honor and privilege to come and speak to this group,

16

1	particularly when we hear the Assistant Attorney General explaining what he
2	thinks the significance of the work of this Committee is.
3	And, Jim, as you have said, the history leading to us being here
4	this morning is some discussion about information-sharing issues at the
5	November Advisory Committee hearings. And I can say on behalf of the
6	International Bar Association, the IBA, that they very much appreciated the
7	invitation to provide input into that process. And what the IBA has done
8	through its Antitrust and Trade Committee is strike a small working group. I
9	think I have to make the same caveat that you made for others, and that is that
10	what you will hear this morning are the views of the working group of three,
11	which have not gone through the protocols of an IBA formal policy statement
12	approval.
13	My colleagues in the working group are Terry Calvani, of the
14	Pillsbury, Madison firm, who I think is well known to many people here, and
15	had hoped to be with us this morning but has been called away and asked me to
16	give his regrets. And John Davies, from the Freshfields firm in Brussels, who
17	was not able to come this morning also asked me to give his regrets. They have
18	both given me carte blanche to go ahead and speak to the written material
19	which we have made available to the Committee last week. What I propose,
20	therefore, to do is to simply touch on some of the highlights in that material
21	without speaking to all of it in detail. But I will be happy to take questions on
22	any of the more detailed points.
23	What I would like to do is to highlight five areas. First what we

17

1	think are the four key points that we would want people to think about in broad
2	brush in this area: to spend a little bit of time on what we see as the
3	stakeholder incentives in this particular area; to discuss some things that we
4	feel are sensible and appropriate general principles: to spend a moment on
5	what we think is the most difficult issue, which is the question of notification
6	and prior authorization before confidential information is shared; and finally,
7	to speak briefly about waivers of confidentiality, which is the area that we feel
8	is most promising for very significant progress in the short term.
9	We have made an assumption not stated in our written material
10	that the protection of confidential information of companies is an important
11	thing. The assumption here is that there are not only compelling private
12	interests that make this important but that there is a compelling public interest
13	in protecting that confidentiality. I won't say a lot about that fact. On
14	occasion I have encountered people who may express some doubt about that.
15	If that assumption is one that the Committee does not share, I would be happy
16	to speak to it in more detail. But we took that as our point of departure.
17	From that we began to think about where we are currently, in
18	terms of the practice in the sharing of confidential information as the three of
19	us have seen it and experienced it. That experience is based in all of our cases
20	as being lawyers in private practice who advise companies in merger and
21	criminal and other cases which, as was said in the introduction, are clearly
22	becoming increasingly international.
23	The first point that I would like to emphasize is a relatively

18

1	unhopeful one, and that is that we do not think that there is going to be rapid
2	progress on non-voluntary exchanges of confidential information unless
3	agencies and their governments are prepared to introduce legal frameworks
4	with relatively stringent and serious safeguards for the protection of that
5	information. The basic reason for that conclusion is that private parties in the
6	business community in most countries are going to be unlikely to perceive
7	significant benefits in the non-voluntary settings and will have very significant
8	concerns about the protection of privacy and fairness.
9	Our second conclusion is much more optimistic, and that is that
10	we believe that there is great scope for continued expansion of the use of
11	voluntary waivers in merger cases and in some non-merger cases, particularly
12	in the process of parallel settlement negotiations with multiple agencies. We
13	are hopeful here because in those particular situations we see potential for
14	significant benefits to both the enforcement agencies and to the private parties
15	who are involved in the process.
16	Our third conclusion, or perhaps recommendation would be a
17	better characterization, is that in trying to make waivers more useful and
18	acceptable, we think it is particularly important that waivers be truly voluntary
19	and that they do not become an automatic activity. The issue around
20	voluntariness is that, in the context of a merger and many other situations, the
21	enforcement agencies have very significant practical leverage which results
22	from the discretion that individual officials have in the activities that they
23	undertake on a day-to-day basis in the investigation. We think that this is a

19

1	subject not much talked about that deserves some serious attention if we are to
2	recommend a real enhancement in the use of voluntary waivers. With respect
3	to waivers not becoming automatic, the concern is that waivers actually be
4	requested and used in situations where there is, in fact, some real benefit to
5	agencies and to the parties giving the waivers. There is a risk that, if waivers
6	become habitual, they may be used in situations where they, in fact, expand the
7	time and cost of an investigation process rather than reduce it.
8	Finally, we note that there is very substantial variability right
9	now in the legal and in the practical levels of confidentiality protection in
10	jurisdictions around the world. Without naming names, we would have very
11	serious concerns about exchanges of confidential information going into
12	certain jurisdictions. There are other jurisdictions where the legal and
13	practical degree of protection would be much higher and the level of trust and
14	confidence would accordingly be much higher.
15	And so what we would suggest for the United States as it thinks
16	about going forward in this area would be to look ideally at a system that will
17	be multilateral rather than a series of checkerboard bilaterals, but that would
18	begin with jurisdictions in which there is a long history of cooperation to work
19	from, where there is a high volume of cases to make the effort worthwhile, and
20	where the other country and agency has a clear and well-established domestic
21	track record on confidentiality. Over time, we would expect that more and
22	more of the jurisdictions would come into a position of meeting those kind of
23	criteria and could be added.

20

1	Let me now turn for a moment to the stakeholder incentives. It
2	was our analysis of the two primary stakeholders which has led to a number of
3	the conclusions that I have spoken about. From the perspective of enforcement
4	agencies, we see significant benefits and no particular downsides to very broad
5	scope for sharing of confidential information to facilitate enforcement in all
6	cases -- merger cases as well as non-merger cases.
7	From the perspective of private parties, the position is quite
8	different. There are cases, particularly mergers, where possible time and cost
9	savings can be very, very significant. And this ties into broader issues that the
10	Committee is looking at about how to make cross-border merger review more
11	efficient.
12	I should actually digress to make a side comment that I meant to
13	make in the introduction: we have had the benefit of reading a number of staff
14	papers on a number of subjects, and while we were not speaking to those in
15	detail, the three of us did want to say how much we were impressed by the
16	scope and quality of analytical work that the Committee staff have been
17	undertaking. There do seem to be some very, very useful and promising ideas
18	being considered.
19	Coming back to the comment on private parties, there is scope
20	for advantages, particularly in merger cases, and in other settlement
21	negotiations. But there are also, as you will have heard and will hear from the
22	ICC, a number of very significant -- at least perceived and sometimes real --
23	concerns, and a number of those are listed in our written material. I will just

21

1	touch on a couple of them here.
2	One is simply the risk that increases every time you have
3	information in multiple locations. It's the commercial business risk of
4	disclosure of highly confidential information, and it is a particular feature of
5	antitrust that you are working with marketing and strategic planning
6	documents of the highest business sensitivity to organizations in many, many
7	of the investigations.
8	The second area is the incremental legal risk that companies face
9	when confidential information which is potential evidence is disclosed to other
10	jurisdictions. This is particularly significant where there are substantial
11	differences between the legal systems in question. There are many similarities
12	currently but also many significant substantive differences, as we all know,
13	between the European and the American system or the Canadian and the
14	American system, and even more when you consider some other jurisdictions.
15	I think the Committee should consider that, to people outside the
16	United States, the United States system is seen as a system that carries
17	enormous legal risk in terms of the potential penalties, including criminal
18	penalties, as well as the potential for private actions and treble damages and
19	simply the time and cost of legal proceedings. That will be a factor as people
20	outside the United States think about confidential information flowing into the
21	United States.
22	So we would say that private parties are seldom going to be
23	motivated to expedite or enhance sharing information in what might be called

22

1	"violation" cases -- be they criminal conspiracy cases or other non-merger
2	cases -- unless they are working towards a parallel settlement negotiation.
3	Thus, we conclude that in non-merger cases, legislation and international
4	agreements that have really substantial safeguards that will give private parties
5	a comfort level about the protection of confidential information would be
6	needed to facilitate information sharing. If the agencies and governments are
7	not prepared to address those issues, we think there will be significant
8	resistance to making progress on non-voluntary exchanges. On the other hand,
9	we conclude that the use of waivers in merger cases is one where there is very
10	significant scope to make progress in the short term. Indeed there is a lot
11	already happening there.
12	I would like to turn briefly to some of the general principles that
13	we felt should be considered in this area. They are set out in some detail in the
14	written material, so I'm just going to touch on them. One is with respect to the
15	use of the confidential information and the basic ideas that it is used only for
16	the designated purpose of advancing a particular investigation.
17	We also make a number of more detailed suggestions that were
18	actually inspired from commercial confidentiality agreements, which are very
19	commonplace in all sorts of transaction settings. We think they have some
20	useful concepts in terms of the disclosing party having discretion but not
21	obligation to disclose information, requirements to return information, and the
22	idea that there need to be remedies or sanctions if the agencies do not, in fact,
23	adhere to the legal requirements that surround the protection of confidential

23

1	information. I think this is something that was touched on in what I regard as
2	the seminal discussion of this whole area, which is the 1991 report of the
3	ABA's International Antitrust Committee. We also comment briefly on how
4	information should be treated. I'll touch only on one point there, which is the
5	concept of national treatment -- that foreigners should not be discriminated
6	against relative to domestic companies.
7	The third principle is no downstream disclosure, and in our view
8	this is the most fundamental item. It is again not one we thought of originally
9	but one that was identified by the ABA's 1991 report. At a minimum it means
10	a track record of no leaks and no free flow to other federal or to subfederal
11	government agencies. But it also, to get a complete closed loop in the
12	downstream, means closing off the ability of third parties to drag information
13	out of the receiving agency using access to information laws or using discovery
14	rules. We're not persuaded that there is any system in the world currently that
15	has a complete closed loop with no downstream disclosure. Any shortfall from
16	that raises an issue that is of concern to private parties in a particular case,
17	whether it is a voluntary or non-voluntary exchange.
18	The fourth point is the preservation of legal privileges. This is a
19	detailed and difficult area. The basic points we would like people to think
20	about here are that there may be privileges that belong to the agencies but also
21	privileges that belong to the private parties involved in having provided
22	information. We think that what makes sense is a "highest common
23	denominator," where the privilege can be claimed at the highest level available

24

1	in either the receiving or the disclosing jurisdiction.
2	The fifth point is that the receiving agency should be under an
3	obligation to assert whatever confidentiality and privilege claims can be made.
4	We think at that stage there is also a need, when the third party is seeking
5	information by discovery or access to information laws, to have a notification
6	mechanism so that the private parties affected also have the opportunity to use
7	their best efforts to protect their information, which may include disclosure
8	subject to an appropriate protective order.
9	Finally, we strongly encourage the use of policy statements in all
10	of the jurisdictions that would be involved in this type of process. They would
11	play an important role in fostering the overall transparency of activity of
12	agencies in this area. Such statements could usefully set out in plain language
13	what the confidentiality laws and policies are in a short and clear way, as well
14	as the treatment of privilege and other issues of discretion that an agency may
15	have in dealing with exchanged information.
16	I would like to comment briefly on notification and prior
17	authorization, which we expect will be the most controversial and critical issue
18	in any attempt to introduce non-voluntary legislated information exchanges. In
19	light of the time, I won't speak to this in a lot of detail. But in the questions I
20	can elaborate with some examples, in particular from Canada. I think
21	basically the agency concern here is that notification and/or prior
22	authorization, whether by a judge or some other official, before an exchange of
23	confidential information occurs will either be burdensome to the conduct of

25

1	investigations or there will be the loss of the surprise element, which may be
2	important for the effectiveness of the investigation.
3	We have not heard either of those arguments really articulated in
4	a way that is terribly persuasive -- or any other terribly persuasive arguments
5	about why there can never be notification or prior authorization. There is a
6	delicate balancing issue in cases where there is a real threat of destruction of
7	evidence or some other prejudice to investigations, but those, I think, are
8	relatively rare cases objectively considered.
9	I would like to end, then, with our thoughts on the area where we
10	would hope to see short-term progress. That is in the use of voluntary waivers
11	of confidentiality which, as the Committee knows, are now a significant feature
12	of modern merger practice and have been used in a few non-merger cases that
13	are well known.
14	As I said at the outset, the question of what is voluntary is, in
15	our view, a very critical issue. What we would like to see is that when
16	agencies are requesting waivers, they identify potential benefits, such as
17	opportunities to save time and cost in an investigation. It would be
18	constructive to identify the areas where parties under investigation or parties
19	to a merger may find it in everyone's interest to have a waiver. The waiver
20	may relate to documents or discussions and it may be a blanket waiver or a
21	restricted limited waiver.
22	What we are concerned about is that agencies not use pressure or
23	threats or implied threats of, for example, slowing down the review of a

26

1	merger, broadening the scope of an investigation, or other things that can be
2	done and are difficult to control at the practical day-to-day level. We don't
3	have full answer to this area of unease, although we do think that one helpful
4	step would be in the policy statements that we referred to earlier: for an agency
5	to say as a matter of policy that it will not use threats of prejudice in the law
6	enforcement investigation by delay or whatever would be helpful as a matter of
7	policy.
8	In terms of more concrete ways to move forward I think what we
9	see right now in waivers is relatively simplistic and somewhat lacking in
10	standardization, and that there would be room to develop model waivers that
11	are perhaps more balanced than the current waiver -- which basically tends to
12	say "we waive all our rights" -- not particularly balanced from the perspective
13	of the private party. In light of some of the things we have touched on earlier
14	about the way in which confidential information may be used and treated, the
15	treatment of privilege, and the assertion of confidentiality and privilege claims,
16	if agencies were prepared to look at a model waiver in which there were some
17	commitments from the agencies with respect to the way in which they would
18	use and treat the information and approach the protection of it, that that would
19	very significantly enhance the attractiveness of waivers to private parties who
20	are asked to think about giving them.
21	That I think is where I should stop in terms of the summary of
22	the views we have come to. I would be happy to take any questions. Thank
23	you.

27

1	MR. RILL: Neil, thanks very much. I'm sure that all of us have
2	a number of questions which we'll defer until all the panelists have an
3	opportunity to speak. Next, Klaus Becher.
4	MR. BECHER: First I would like to thank the Committee for
5	inviting the International Chamber of Commerce to present its views in this
6	hearing. ICC has formed a working group which I have the honor to chair. We
7	have been operating in a very tight time frame and we had the first meeting in
8	the beginning of March. So I have to add a caveat which Neil also has added
9	with his remarks. We have not a formally-adopted ICC position, but at least
10	we have been able to come up with a draft paper which will be distributed
11	afterwards.
12	I'm working for DaimlerChrysler and I can state actually, from
13	my own experience, that the increasingly international nature of business
14	transactions has not only resulted in a growing number of mergers and
15	cooperation projects but also in a growing number of jurisdictions you have to
16	deal with when you want to get such a merger or another transaction approved.
17	In response to this, it's understandable that competition
18	authorities are examining means of cooperation to facilitate and coordinate
19	their respective review and their investigation and decision-making processes.
20	The business community certainly recognizes the potential
21	benefits of such cooperation, but the business community has also been greatly
22	concerned by one of its main elements, which is the exchange of confidential
23	corporate information.

28

1	Confidential information supplied by companies to competition
2	authorities in the context of merger reviews or antitrust investigations often
3	includes extremely sensitive information relating to the strategy of the
4	company, its investment plans, and its marketing roles and methods. To give
5	you an example, in the merger proceedings relating to the merger between
6	DaimlerChrysler, we had to provide our marketing plan for the next five years
7	relating to passenger cars both to the authority in Brussels and to the Federal
8	Trade Commission in Washington. And the parties are certainly highly
9	interested that these marketing plans not become known to their competitors.
10	Indeed, if such information falls into the hands of competitors of
11	the company involved or into the public domain, which is even worse, this
12	could have serious adverse consequences on the competitive position of the
13	company or its share market value. This risk is not theoretical, especially
14	when information is sent to countries where the company providing the
15	information faces strong competition, especially from state-owned companies
16	or in the context of mergers when share prices are especially volatile. ICC,
17	therefore, applauds the initiative of the International Competition Policy
18	Advisory Committee in addressing this issue and in inviting the international
19	business community to contribute to its work in this area.
20	We have been working for several years on issues arising out of
21	the increasing cooperation between antitrust authorities which have an impact
22	on business. ICC has issued a paper in 1996, which is called the ICC 1996
23	Statement, setting out business concerns relating to the exchange of

29

1	confidential information between antitrust authorities and also suggested
2	safeguards to reduce the risks of prejudice to the companies concerned. ICC
3	has now been asked by ICPAC to submit views on its core concerns arising
4	from the exchange of confidential information and recommendations to address
5	these concerns.
6	As to the scope of our draft paper, we will focus on information
7	exchanged in the merger review context, and I will explain later why.
8	Cooperation between authorities in the merger area is increasing substantially,
9	as multijurisdictional merger transactions become more common. To ensure
10	transparency and predictability for both companies and authorities involved in
11	multijurisdictional merger notifications, ICC feels that it is essential to have
12	internationally agreed standards accepted by authorities as well as by
13	companies, which would be integrated into multilateral as well as bilateral
14	agreements.
15	With respect to the non-merger area, we make reference to the
16	ICC 1996 Statement, which will be attached to our draft paper on exchange of
17	confidential information. The 1996 paper pointed out that although certain
18	overarching competition law principles are generally accepted in major trading
19	countries, considerable differences in the international antitrust laws still do
20	exist.
21	Some members, especially in North America, did not feel that
22	further convergence of these laws needs to be a precondition for information
23	exchange. Other ICC members, particularly in Europe, felt that with the

30

1	current low level of convergence, cooperation between antitrust authorities
2	should not include the exchange of confidential information. Being a European
3	lawyer, I would like to point out some of the differences which actually have
4	caused the European ICC members to feel different from their North American
5	colleagues.
6	These differences are also set out in the 1996 paper. Most
7	important is that the EU competition system is an administrative
8	prohibition-based system, which actually encourages companies to file a large
9	quantity of business information to obtain exemptions and immunity. The U.S.
10	system is an essentially litigious system driven by private parties, where less
11	business information is regularly supplied by companies.
12	While in the U.S., which extends its antitrust jurisdiction to acts
13	having an effect of its export commerce, antitrust offenses can lead to criminal
14	penalties and treble damages, antitrust offenses are purely a civil matter in the
15	EU, and the European Commission's jurisdiction is limited to acts implemented
16	and effecting competition within the EU.
17	Another area of difference which is of particular concern to
18	business is the extent to which competition authorities are able to resist
19	disclosure to third parties. In some jurisdictions the competition authority
20	could be obliged to disclose information for the purpose of legal proceedings
21	involving third parties. Despite these differences, ICC members were,
22	however, unanimous in their concern that any confidential corporate
23	information exchanged should be properly protected. The 1996 paper stressed

31

1	that companies should be given prior notification before any proposed
2	information exchange, and recommended several other safeguards.
3	The ICC 1996 Statement also pointed out that alternative forms
4	of cooperation to information sharing agreements, such as ad hoc cooperation
5	with the company's consent, could help avoid some of the problems discussed.
6	Now to the exchange of information in the merger context. Of
7	course, companies have an interest in reducing the administrative burden,
8	costs, and delays resulting from multijurisdictional merger reviews. I said this
9	morning to Janet McDavid in the DaimlerChrysler merger we had to file in nine
10	different jurisdictions, and I felt ashamed because Janet told me that she is
11	working on a case where 27 different jurisdictions are involved. And I am
12	afraid that this number may even increase in the future when countries learn
13	more about competition laws and enact their own national laws.
14	Companies have an interest in ensuring that the decisions given
15	by different authorities are consistent, which is not difficult in a case which
16	does not involve any substantial antitrust issues, like the DaimlerChrysler
17	merger, but which may be difficult in cases which involve 27 jurisdictions with
18	27 different views.
19	To the extent that the exchange of certain information could help
20	ease the problems associated with multijurisdictional merger review,
21	companies are often prepared to consent to authorities exchanging their
22	confidential information and to accept the risks associated with this in the hope
23	of a speedier, more consistent, and less costly and burdensome merger review

32

1	process.
2	To foster this mutually beneficial cooperation between
3	companies and competition authorities, however, it is essential that a high
4	degree of trust in the will and the ability of competition authorities to ensure
5	the protection of such information is extended.
6	We have to keep in mind that information exchange is only one,
7	but a very important, element in the broader framework, and other approaches
8	to ease problems arising from multijurisdictional merger review must also be
9	pursued. These include reduction of the information required to the essential
10	minimum -- right now I think the antitrust authorities go exactly in a different
11	direction -- harmonization and transparency of substantive and procedural
12	requirements to the extent possible; clear time frames; and more frequent use
13	of what we call negative comity, that is, when authorities decline to exercise
14	their jurisdiction.
15	This principle may assume changes to national legislation, but
16	from a business community point of view we should discuss not only positive
17	comity but also negative comity. I'm only afraid that no country has the
18	courage to enact laws which provide for negative comity. This can probably
19	only be done on an international treaty basis, if at all.
20	We have then discussed principles for the exchange of
21	confidential information in multijurisdictional merger cases, and the ICC
22	Working Party, at this stage, recommends that the following set of principles
23	should be applied when confidential information is exchanged in

33

1	multijurisdictional merger cases. And these principles should be integrated
2	into multilateral and bilateral agreements.
3	As to the preconditions for exchange: confidential information
4	should only be exchanged with the consent of the parties involved from whom
5	the information was obtained. Where such information is the property of a
6	third party, authorization should also be obtained from that party.
7	The terms and conditions under which the company consents to
8	the exchange should be set out and agreed by the company and the competition
9	authority supplying the information.
10	The second precondition: information exchange procedures
11	should be fair and transparent and carried out in consultation with the
12	companies owning the information. For example, companies must be given the
13	opportunity to explain any information transmitted which could be
14	misinterpreted.
15	A further precondition: the competition authority requesting the
16	information should have exhausted its own administrative possibilities for
17	obtaining the information independently before making the request. The next
18	precondition: any exchange of information should speed up the investigative
19	process rather than lead to extra delays.
20	Next precondition: information exchanged should be subject to
21	conditions of confidentiality in the receiving jurisdiction, at least as stringent
22	as those of the jurisdiction supplying the information. Legal safeguards in the
23	receiving jurisdiction should ensure that information exchanged will not be

34

1	disclosed to third parties.
2	Last condition: the principle of reciprocity should be respected.
3	That is, the competition authorities supplying and receiving the information
4	should both agree to follow the same rules regarding the exchange of
5	information.
6	The next subject we discussed was the scope and duration of
7	information exchange. Information should be considered to be confidential
8	when firstly the owner/provider company itself defines the information as being
9	confidential; or secondly, the information is considered to be confidential or
10	subject to legal professional privilege by domestic legislation of the supplying
11	or the receiving authority. We do not claim that information has to be treated
12	as confidential when it's publicly available, of course.
13	The information for which consent is required for exchange
14	should be precisely identified and consent must be sought for any modifications
15	to the scope of the information exchange.
16	We believe that the identification of confidential information for
17	exchange should be done on a case-by-case basis and suggest that it would be
18	difficult to identify categories of confidential documents that agencies could
19	share under a waiver as suggested in the ICPAC staff draft protocol on
20	international agency cooperation.
21	Of course, should information exchange be limited to the
22	necessary minimum, the transmission of information must be limited in time
23	and be returned to the owner or respective provider company after the agreed

35

1	time period elapses. All notes and copies of the information must be destroyed
2	to prevent institutional knowledge.
3	To the circumstances of disclosure: the company should be
4	informed of the identity of the authority or the authorities to whom the
5	information would be sent, the terms and conditions under which the supplying
6	authority was providing information to the other authority; the national rules
7	governing the use of the confidential information which would bind the
8	receiving authority, and last, but not least, the date of the proposed disclosure.
9	We also feel that we need to establish conditions for the use by
10	the receiving authority of the information exchanged. The use should be
11	limited to the purpose and to proceedings for which the company providing the
12	information agreed to its transfer. Secondly, information exchanged should not
13	be disclosed to any parties outside the receiving authority, in particular
14	third-party plaintiffs, other agencies or governments. Legal safeguards should
15	be put into place to ensure that such information will not be disclosed to third
16	parties.
17	ICC has serious concerns about information being supplied to
18	any jurisdiction without these safeguards. Where such an unsatisfactory
19	situation exists, authorities in the receiving jurisdiction must commit to
20	resisting attempts by third parties to obtain information from them, including
21	by invoking all available privileges and exercising any prerogatives under
22	Freedom of Information legislation.
23	Next condition: the information exchanged should be subject to

36

1	legal professional privilege when it would be considered as deemed so under
2	the rules of either the supplying or receiving jurisdiction.
3	We then focus on a scenario where the agreed terms of exchange
4	are not respected. If terms and conditions under which a company agreed to
5	information exchange are not respected, it should have the right to obtain the
6	immediate return of the information from the receiving authority and not be
7	obliged to provide further information.
8	We also feel that it would be desirable for the company to have
9	the possibility of seeking judicial relief, including orders for the return of all
10	or part of documents or information provided, and constraining the use by the
11	foreign authority of all or part of the documents or information. However, we
12	are aware that mechanisms to make this possible in an international context are
13	still not in place.
14	As to the confidentiality waiver agreement between a company
15	and a competition authority, Neil has already touched on issues which we also
16	discussed. We suggest that the following elements should be included in any
17	agreement in which a company party to a merger consents to a competition
18	authority providing its confidential information to another competition
19	authority.
20	First, the identity of the authority to whom the information will
21	be sent. Second, the date of the proposed disclosure. Third, the date on which
22	the information will be returned together with an understanding that all notes
23	and copies of the information with the receiving authority will be destroyed.

37

1	Fourth, the purpose for which the information is being exchanged. Next,
2	precise identification of the information to be exchanged, together with an
3	understanding that further consent will be sought if the scope of the
4	information to be exchanged is modified.
5	Next point: a description of the national rules governing use of
6	the confidential information by the receiving authority. Then the terms and
7	conditions under which the supplying authority is providing information to the
8	receiving authority, which should include undertakings by the receiving
9	authority that the use of the information will be limited to the purpose and to
10	proceedings for which the company providing the information agrees to its
11	transfer; and that the information exchanged will not be disclosed to any
12	parties outside the receiving authority, in particular third-party plaintiffs,
13	other agencies or governments. And it will resist attempts by third parties to
14	obtain information from it, including by invoking all available privileges and
15	exercising any prerogatives under Freedom of Information legislation.
16	Last: a provision that in the event that the terms and conditions
17	under which a company agreed to information exchange are not respected, the
18	company should have the right to obtain the immediate return of the
19	information. The company should not be obliged to provide further
20	information, and the authority should make no further use of the information in
21	question. It would also be desirable for the company to be assured of the
22	possibility of obtaining judicial relief as discussed, but ICC has also stated
23	that the required mechanisms are still not in place.

38

1	Again, thank you for the opportunity to be involved in the
2	discussion of a highly fascinating subject. ICC is certainly prepared to
3	continue discussions in this field, which hopefully will lead to a solution which
4	is satisfactory to both the antitrust authorities and the business community.
5	Thank you.
6	MR. RILL: Thank you, Klaus. I'm sure we'll have questions,
7	not only today but down the road as we formulate our own recommendations
8	that we'll be addressing to the ICC. Thank you for the very thoughtful input.
9	Jan, Phil, how do you want to proceed?
10	DR. STERN: Excuse me, before you do, I am wondering if you
11	have any paper that accompanies your statement. Okay. Thank you.
12	I've been spoiled by my experience at the International Trade
13	Commission. I always like to have prehearing briefs or something so that I can
14	prepare questions, so I'll have to listen to you more carefully.
15	MR. PROGER: The Section of Antitrust Law is preparing
16	papers. We hope at the May 17th hearing, when the two ABA panels appear,
17	that we will have permission to present those papers. Jim, as a past Chair of
18	the Section knows, we have to go through ABA procedures to present the
19	papers, but we are working on that process.
20	MR. RILL: And it makes the federal government look like a
21	smoothly running operation.
22	MS. McDAVID: It does.
23	MR. RILL: Let me acknowledge the presence of another one of

39

1	our Committee members, Tom Donilon, who joined us here a little while ago.
2	Tom is with O'Melveny & Myers and is a former high-ranking State
3	Department official.
4	DR. STERN: If I might just say, if my request has any
5	assistance or any weight at all, I would appreciate having something in writing
6	on the 17th. Thank you.
7	MR. RILL: Phil?
8	MR. PROGER: Jim and Paula, thank you for having me again.
9	It is a privilege to be here. I do want to acknowledge that working with Merit,
10	Cynthia, Andrew and Stephanie has been a real delight. And Merit, I greatly
11	appreciate the assistance and cordiality that you have provided. I might say on
12	a personal note, it is kind of a privilege to be here today testifying before
13	Eleanor Fox. Eleanor started me in the Section. I worked for her, I will not
14	say how long ago, Eleanor, but it was on the original Hart-Scott-Rodino
15	legislation.
16	At the outset, I am obligated to issue a disclaimer on behalf of
17	Jan and myself. We appear here today as individuals and not as Chair-Elect or
18	Chair of the American Bar Association's Section of Antitrust Law. Our views
19	are our own and not the views of either the American Bar Association or its
20	Section of Antitrust Law.
21	I guess we all wear a lot of hats here. I must say that Neil and
22	Klaus were kind enough to provide their papers to us in advance. I do not
23	know if they are aware, but I am a member of both their organizations, and I

40

1	was proud to be a member when I read their excellent papers. They are both,
2	to quote Neil's partner, Bill Rowley, first rate. And I will not try and repeat
3	the various considerations, recommendations, and ideas expressed in them
4	other than to say, I do sincerely believe they are very well thought out and
5	cover the issues excellently.
6	So with that said, let me see if I can provide a little bit of a
7	different slant. When I testified last, I indicated that I was skeptical that there
8	is a significant issue of confidentiality in multijurisdictional transactions and
9	investigations. Given the differences worldwide in our substantive laws and
10	processes trying to create a system in which there is non-voluntary mandated
11	disclosure will create a lot of problems, many of which I think are difficult
12	even to foresee today.
13	Neil made the comment that many non-Americans look at the
14	U.S. adversarial system with concern and horror. I can assure you, Neil, that
15	many Americans feel the same way at times about our system. We have a
16	different system of enforcement, and in that system those being investigated by
17	the respective agencies must be aware of two things that are somewhat unique
18	to the United States, although maybe one of them has a parallel in the
19	European Union.
20	One is we do have a system of private litigation, and while one
21	can argue that compulsory mandated disclosure to enforcement agencies would
22	not be turned over to private litigants, in point of fact private litigants are a
23	little bit smarter than that. What they will do is go to the court and they say to

41

1	the court that the parties have already produced this information to the various
2	enforcement agencies. Just compel the parties to give us what they have given
3	already the various enforcement agencies.
4	Moreover, the information that you have been compelled to give
5	may be beyond the scope of what a private litigant in the United States may
6	otherwise be entitled to discover. So I think the underlying linchpin of our
7	litigation system poses some considerations that ICPAC should carefully
8	consider before recommending compulsory disclosure.
9	Secondly, and to some extent there is a parallel with the
10	European Commission and the Member States, we have in the United States
11	multiple sovereigns. Not only can the federal government, either the Federal
12	Trade Commission or the Department of Justice, conduct investigations, but
13	also can one or more states. Usually the federal agency and the states
14	cooperate in their investigations, but not always. While the existence of
15	private litigation and multiple sovereigns does not make mandated confidential
16	disclosure impossible, it does complicate the process.
17	In addition, there are at times different public policies than
18	purely competition. And these other public policies, which often are non-
19	competition policies, can raise significant problems when information has been
20	turned over to competition enforcement authorities, but now are available for
21	other uses. So disclosure, particularly in situations where it goes to
22	organizations that have not established the history of somewhat apolitical
23	dedication to competition principles, raises serious concerns.

42

1	And there are reasons why, in representing zealously a client,
2	that may not be in the best interests of the client.
3	One, it can affect, frankly, some of your tactics in defending
4	your client. There may be reasons why at a particular point in time it would be
5	premature with respect to one party to turn over information that is perfectly
6	mature and appropriate with respect to another party. Two, it could broaden
7	the scope of either a private litigant's case or another competition authority's
8	case by providing information to them that really is outside the core scope of
9	their investigation, but now raises issues that they feel that they must look into
10	even if tangential. So it adds burden and expense.
11	Nevertheless, If ICPAC feels that there should be a
12	recommendation of some mandatory disclosure, I would suggest that some of
13	the following considerations be considered.
14	One, I think there should be greater transparency in how the
15	enforcement process works and under what context information will be
16	disclosed by and between competition authorities.
17	Two, there should be improved awareness and transparency of
18	confidentiality protections which apply in foreign jurisdictions. If we're going
19	to go down this road, I think that the jurisdictions involved need to be open and
20	transparent on their laws and make it clear when you provide confidential
21	information what your protections are, what your rights are, and what the
22	process is to protect your rights.
23	Three, there have been a few statements by senior competition

43

1	authorities suggesting that failure to agree to waive confidentiality protections
2	may create an adverse inference. I think that it must be very clear that such an
3	inference is not appropriate and that there may be perfectly legitimate reasons
4	why a party may not want to waive national confidentiality protections to allow
5	enforcement agencies to exchange and share the party's confidential
6	information. And I have tried to enumerate reasons, such as private litigation
7	in the United States or the use of the information for non-competition reasons,
8	why parties may be reluctant to waive confidentiality.
9	Four, any exchange of confidential information on a mandatory
10	basis must fully maintain and protect the attorney-client privilege. That, I
11	think, is fundamental to our system of jurisprudence in the United States, and
12	to due process.
13	Five, if there are to be mandatory disclosures or waivers, they
14	should be limited in scope, while reducing the volume, not increasing the
15	volume that a party must in aggregate produce. I think there is a real danger
16	that we might end up with the lowest common denominator and everyone seek
17	their own Christmas ornament. And thus, in fact, the parties end up with
18	increased burden.
19	And if the documents are produced, then there must be a clear
20	understanding of the limits on their use and that there use is for competition
21	law enforcement purposes only. If there is going to be mandatory disclosure,
22	there must be no right of the parties receiving the information to further
23	disclose them to other parties without permission.

44

1	Finally, I think that there should be some ability of the parties
2	involved to receive notice before any exchange or disclosure is made. Parties
3	should have an absolute right to be able to obtain a review before a neutral
4	decision maker, such as an Article III Judge in the United States, before their
5	documents originally obtained through mandated disclosure are turned over to
6	a third-party.
7	Right now the enforcement processes in the United States and
8	the European Commission, particularly with respect to merger enforcement,
9	are different. The European Commission approach is much more front-ended,
10	while the U.S. approach, with our second request and ultimate potential
11	litigation, is more back-ended. Timing differences should be acknowledged,
12	and the parties should have some right to have some say over the timing.
13	Last, if we are going to go in the direction of mandated
14	disclosure and sharing among enforcement agencies, we are probably better off
15	with bilateral negotiation, initially with the European Commission, and using
16	what develops from that negotiation as a model. But I would only do so if
17	there is a limitation placed on DG-IV's requirement of transferring information
18	to Member States. But if that could be dealt with and if we are going to go in
19	this direction, despite what I view as some significant pitfalls, I think bilateral
20	negotiations principally with DG-IV is probably the starting point.
21	I thank ICPAC for the opportunity to appear here today. You
22	have a difficult task and I hope that my comments are helpful. Thank you.
23	MR. RILL: Thank you, Phil. Jan?

45

1	MS. McDAVID: I'm going to speak principally from my
2	perspective of having been involved in a number of multinational mergers,
3	including the one to which Klaus referred in which we are filing in 27
4	jurisdictions, which is the "mother of all multinational mergers," as well as
5	civil investigations, principally, as well as based on one or two criminal
6	proceedings.
7	In addition, I participated with Jim Rill, my colleague Tom
8	Leary, and Bob Weinbaum in providing input to the Division and Federal
9	Trade Commission on the IAEAA. We were particularly interested in the
10	provision that excepted Hart-Scott-Rodino material from disclosure pursuant
11	to what we call the "Vowel Act," because it is otherwise unpronounceable,
12	based on concerns of disclosure of confidential information, particularly
13	among the European Commission and its member jurisdictions. I think most of
14	those fears have not materialized, but it was an absolutely legitimate concern
15	at the time.
16	I want to compliment both Neil and Klaus on their excellent
17	papers. There really are some very important but subtle points in there that I
18	hope the Advisory Committee will pay attention to as you proceed to your
19	recommendations.
20	The data gathered in a merger investigation, as Klaus has
21	already explained, truly are the crown jewels of a corporation, current and
22	forward-looking strategic planning data and marketing data, the disclosure of
23	which could be incredibly damaging to the company on a competitive basis or

46

1	even in a political context. I've represented foreign companies in the United
2	States, and I've represented American companies in foreign jurisdictions, and
3	there is always a fear that if you are not a national of the regulating authority,
4	you are going to be treated differently somehow than nationals may be treated.
5	My foreign clients have been worried that they will be subject to
6	greater regulation. My American clients in Europe are worried that a
7	European firm may secure an advantage over them as a consequence of
8	information they disclose or, perhaps, that a decision may be made in a matter,
9	and may have motivations that are not entirely on the merits. And the
10	confidentiality of the information is in many ways the linchpin of all of that,
11	because this information is so sensitive.
12	The parties' objectives in consenting, as they often do, to the
13	sharing of information I think are important to consider. In my experience the
14	issue of time and of cost savings is rarely actually realized. What really
15	happens is that everybody gets more than they might otherwise get. The
16	Federal Trade Commission or the Department of Justice will want everything
17	that is disclosed, all the filings that are given to the foreign authorities, and the
18	foreign authorities will want some of what is given to the United States
19	agencies.
20	What you really gain perhaps is the ability to coordinate the
21	timing of the decisions at the various agencies so that you're not going to be
22	gamed between decision points. And you are more likely to assure consistent
23	analysis and consistent outcome and probably an outcome that is more likely to

47

1	be on the merits and less likely to be politically motivated. Assurances of
2	confidentiality, as all the other speakers have said, is absolutely critical to
3	this.
4	The risk of inconsistent privileges in different jurisdictions can't
5	be overemphasized. Here, for example, we have the problem that material that
6	would be testimony before a grand jury taken under waivers or assurances of
7	confidentiality or immunity arrangements may be transferred to the Canadian
8	government under the MLAT and then come back into the United States for use
9	in civil litigation.
10	The European Union has different rules with respect to the
11	attorney-client privilege than the United States does, and those differences are
12	very significant. And so, for example, we are often concerned that
13	communications by inside counsel are not recognized as privileged in Europe,
14	although they are recognized as privileged in the United States. Those
15	materials may, through the back door, become available to the American
16	agencies when they would not otherwise have been, as a result of the exchange
17	of information.
18	All of the waivers that I have been involved in, and there have
19	been many, are all "one off." And that is an important point I think, and I
20	would emphasize as the others have, desirability of transparency and some
21	protocols in this area to minimize the need to engage in a one-off negotiation
22	with respect to every transaction.
23	In this regard, as Phil did, I would like to point you to the

48

1	protocol that exists between the federal agencies and the state attorneys
2	general. It is often the subject of additional negotiation, but the protocol at
3	least provides a uniform starting point for all of those negotiations, and I think
4	we all learned something from each of those negotiations. The states are even
5	talking about modifying their protocol based on the many negotiations they
6	have had with private parties and the things they have learned. A great deal
7	more transparency about what sorts of provisions are commonplace and how
8	you deal with issues like the protection of the attorney-client privilege in the
9	context I described would be very useful to the parties and to the business
10	community.
11	Today my clients have been willing to agree to waivers of
12	confidentiality principally with respect to the major jurisdictions, such as the
13	European Commission, the Canadian government, the Australian government,
14	and the New Zealand government, which have an established track record of
15	confidentiality. I think there would be far greater reluctance to share
16	information with authorities that don't have that track record and in whom they
17	may not have as high a level of confidence in the protection of their
18	information.
19	And finally, I would note that although there have always been
20	in my experience excellent protections with respect to confidentiality of the
21	data, the differences in the way proceedings are handled do create certain
22	suspicions and concerns on the part of parties who are involved. For example,
23	in Europe it is far more commonplace for the regulators to articulate their

49

1