Avoiding antitrust pitfalls during pre-merger negotiations and due diligence

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Managing the Risk: Set up a Process and Police it



Below are suggestions for safeguarding competitively sensitive information during a transaction. The suggestions are not exhaustive and are not the only means of safeguarding competitively sensitive information. Ultimately, assessing whether safeguards actually prevent anticompetitive information exchanges will depend on the facts and circumstances of each case.

For the disclosing party:

  • Mask customer identities and aggregate all competitive information. Consider using an independent agent to identify, collect, and disseminate competitively sensitive information in an aggregated or other form that shields customer-specific and other competitively sensitive information.
  • Redact documents and information to shield customer identities and other information. In particular, ensure that materials made available to bidders who could misuse it in an anticompetitive manner do not inadvertently reveal confidential customer information that was intended to be redacted. This is especially important if competitors are considering a bid. Note that the more competitively sensitive the information, the stronger the protections needed. If the relevant market has only a few well-known players and some or all of them are evaluating the business or asset package, greater efforts may be necessary to ensure redactions are effective.
  • Examine all materials made available to bidders that may raise competitive concerns, including schedules later added to data rooms. Consider whether bidders can piece the documents together in a manner that inadvertently reveals confidential information.
  • Reduce the risk of overbroad dissemination of confidential information by prohibiting individuals with data room access from downloading or e-mailing confidential information in the data room.
  • Ensure document destruction instructions at the end of the due diligence process are clear, including penalties or consequences for a breach; follow-up to ensure instructions are followed.

For the receiving party:

  • Outside counsel should vet clean team members for the role, including any individuals added to a clean team at a later date. Clean teams should have separate protocols that establish how competitively sensitive information should be treated and with whom it can be shared (e.g., inside the clean team and with outside consultants, but not with any business personnel not on the clean team).
  • Check that employees do not save confidential information meant only for due diligence or clean team members on accessible share drives within the company.
  • If reports from consultants and the clean team must be provided to other business personnel, those reports should contain blinded, aggregated versions of the competitively sensitive information and be subject to review by counsel before dissemination.

The main message is that companies should consider the risks and establish appropriate protocols. At all times companies should take into consideration the sensitivity of the information offered to or requested by a counter-party and how the exchange of the information could affect competition, both in the short term and if the deal doesn’t happen. Once the process is set up, both parties should police the rules to ensure they are followed.


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