by Sheila R. Adams, D. Jarrett Arp, Arthur J. Burke, Ronan P. Harty, Jon Leibowitz, Christopher Lynch, Mary K. Marks, Suzanne Munck af Rosenschold, Howard Shelanski, and Jesse Solomon
The Department of Justice (“DOJ”) Antitrust Division recently updated its Civil Investigative Demand (“CID”) forms and deposition procedures to provide clear notice to CID recipients and deponents that the evidence they provide during the course of an investigation may be used by the DOJ in “unrelated” cases or proceedings.
This highlights the risk of “spin off” investigations—including criminal investigations—if a party produces evidence of other violations (such as communications or coordination among competitors) during an investigation.
The Antitrust Division frequently issues CIDs during the course of its civil investigations, including routine merger reviews, to compel production of relevant information and documents from suspected violators, potentially injured persons, and neutral third parties. Under the Antitrust Civil Process Act, prior consent of the person producing material in response to a CID is not necessary for the Division to share CID materials with DOJ employees or agents outside the investigation or with the Federal Trade Commission (“FTC”). See 15 U.S.C. § 1313(c)-(d). Similarly, the Antitrust Division Manual, which provides additional guidance to Division staff, succinctly states, “[t]he Division’s use of CID material is not restricted to the pending investigation.”[1]
Notably, the same policies and practices apply to the FTC. Indeed, under the Federal Trade Commission Act, the FTC may share CID materials with not only employees within the agency, but also with officers and employees of federal and state law enforcement agencies who wish to use such material “for official law enforcement purposes.” 15 U.S.C. § 57b-2(b)(6). Within the FTC, investigative referrals are not limited to the Bureau of Competition, but may extend to the Bureau of Consumer Protection as well.
In an effort to increase transparency into this aspect of its investigative procedures, the DOJ Antitrust Division, in a press release issued on September 10, 2020, announced that it will add the following language to its CID forms:
The information you provide may be used by the Department of Justice in other civil, criminal, administrative, or regulatory cases or proceedings. Individuals may refuse, in accordance with the rights guaranteed to them by the Fifth Amendment to the Constitution of the United States, to produce documents and/or answer any question that may tend to incriminate them.[2]
The Division likewise explained that, going forward, staff attorneys taking depositions pursuant to a CID will ask questions to ensure deponents understand how their testimony may be used by the DOJ.
This announcement serves as a useful reminder that responding to a CID, even as a neutral third party, may have serious unanticipated consequences. Information provided during a merger investigation may result, for example, in a criminal investigation into potential Sherman Act, Section 1 hard-core violations, such as price fixing, market allocation, or bid rigging, if the facts suggest an investigation is warranted.
Such concerns are not hypothetical. During the investigation of the Chicken of the Sea and Bumble Bee Foods merger, Division attorneys uncovered evidence of a price-fixing scheme in the packaged seafood industry.[3] While the merger was abandoned, the discovery led to a lengthy criminal investigation, culminating in charges against four executives and two companies.[4] Indeed, earlier this year, the former CEO and President of Bumble Bee was sentenced to over three years in prison for his role in the conspiracy.[5] In addition, other merger reviews have given rise to DOJ criminal investigations of alleged employee “no-poach” agreements between competing employers.
As a result, recipients of CIDs are encouraged to review their responses carefully prior to production and raise any concerns with their attorneys. The most significant risk is that a party produces some evidence of other antitrust violations—such as price fixing, market allocation, or no-poach agreements.
Footnotes
[1] DOJ, Antitrust Division Manual III-63 (5th ed.), https://www.justice.gov/atr/file/761166/download (last updated Jan. 13, 2020).
[2] DOJ, Antitrust Division Announces Updates to Civil Investigative Demand Forms and Deposition Process (Sept. 10, 2020), https://www.justice.gov/opa/pr/antitrust-division-announces-updates-civil-investigative-demand-forms-and-deposition-process.
[3] DOJ, Civil Investigations Uncover Evidence of Criminal Conduct: Division Update Spring 2017, https://www.justice.gov/atr/division-operations/division-update-spring-2017/civil-investigations-uncover-evidence-criminal-conduct (last updated Mar. 28, 2017).
[4] DOJ, Cartels Beware: The Antitrust Division Prepares for Trial and Continues Criminal Investigations in Key Markets, https://www.justice.gov/atr/division-operations/division-update-spring-2019/cartels-beware (last updated Mar. 26, 2019).
[5] DOJ, Cartels Beware: The Antitrust Division Prepares for Trial and Continues Criminal Investigations in Key Markets, https://www.justice.gov/atr/division-operations/division-update-spring-2019/cartels-beware (last updated Mar. 26, 2019).
D. Jarret Arp, Arthur J. Burke, Ronan P. Harty, Howard Shelanski, and Jesse Solomon are partners, and Sheila R. Adams, Jon Leibowitz, Christopher Lynch, Mary K. Marks, and Suzanne Munck af Rosenschold are counsel, at Davis Polk & Wardwell LLP.
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