FTC Provides Guidance on Sharing Information in Merger NegotiationsPDF
On March 20, the Federal Trade Commission published a blog post that provides guidance on sharing information in merger negotiations.
The FTC post explains that exchanging competitively sensitive information during negotiations – such as information about current and future pricing, strategic plans and costs – can create antitrust risks. These risks are particularly serious in discussions between competitors, which normally would not share this information with each other. Although the transaction discussions provide a legitimate rationale for sharing the information, they do not immunize the parties from potential antitrust liability. Indeed, the FTC has taken action against companies for exchanging information during transaction discussions in ways that threatened competition – even if the underlying transaction itself posed no antitrust issue.
To address these antitrust risks, the FTC advises companies and their antitrust counsel to develop a plan for preventing improper information sharing in merger negotiations. It suggests a number of specific protections that an information-sharing plan should include, such as:
- Sharing as little competitively sensitive information as feasible;
- Masking customer identities and aggregating competitive information that is shared;
- Using clean teams or third-party consultants to review sensitive information; and
- Preventing clean-team employees from saving sensitive information in locations that others within the company can access.
The FTC also recommends that companies and their counsel monitor compliance with the plans that they establish. If improper information sharing is discovered, the FTC advises companies to stop such conduct immediately, investigate how much information was shared and how it was used, and notify the FTC before the agency independently discovers the problem as part of its merger review process.
Although these safeguards can introduce additional complexity, if handled properly and upfront, they can be implemented with minimal impact on deal negotiations. The risks of not taking these steps, however, can be significant – including delaying approval of the merger, defending a separate antitrust action or paying civil penalties.
This post serves as a useful reminder that the FTC is concerned with the potential antitrust risks of sharing information in merger negotiations. If you have any questions about how to apply this guidance to a specific situation, please contact Greg Skidmore, Erik Zimmerman or your regular Robinson Bradshaw contact.