The Past, Present, and Future of Timing Agreements
During TransPerfect Legal’s third annual Antitrust Clearance and Merger Enforcement conference, a panel of expert antitrust attorneys shed light on the evolving landscape of timing agreements during the second request process, and how timing agreements (or the absence thereof) impact downstream processes, workflows, and burdens.
This blog post summarizes key insights from the session and discusses potential scenarios for when it makes sense to pursue or forego a timing agreement.
In the early 2000s, timing agreements were not as commonplace, and regulators like the Department of Justice (DOJ) relied on deficiency letters or temporary restraining orders (TROs) to manage the overwhelming volume of documents received in response to a second request. However, that landscape changed in 2006 when the DOJ introduced a model timing agreement, providing a structured approach.
In the 2010s, timing agreements became the norm, adapting custodian limitations based on deal size and complexity. Fast forward to the present, and that process is transforming.
Current Challenges and Erosion of Benefits
Recent observations reveal a divergence between parties' expectations and the benefits they derive from timing agreements. Private parties are increasingly skeptical of the advantages offered by traditional timing agreements. Instead of acquiescing to the agency's onerous requirements, parties are scrutinizing each provision, weighing the pros and cons, and often streamlining agreements to focus on key aspects, primarily the post-compliance waiting period before closing the transaction.
In an increasing number of instances, parties are foregoing timing agreements completely. Interim deadlines are becoming increasingly challenging, while requests for document custodians are expanding, sometimes exceeding 100 individuals. The lack of a clear rationale behind these expansive requests raises questions about reasonableness and what constitutes a justifiable demand.
Divergence Among Regulatory Agencies
Notably, there's a growing discrepancy in the willingness of parties to sign timing agreements with the Federal Trade Commission (FTC) compared to the DOJ. The latter, burdened by arduous requirements, sometimes extend the decision-making period to 150 days post-compliance, introducing uncertainty for businesses. Surprisingly, anecdotal evidence suggests that having a timing agreement may not significantly impact the dialogue with regulatory agencies on the merits of a transaction. That being said, the FTC has also made requirements more burdensome, so this divergence may be short-lived.
Impact of the Current Administration
The Biden administration's heightened focus on antitrust issues is influencing the landscape of timing agreements. Negotiations are becoming more complex, and parties face difficulties in achieving certainty on custodian limitations during ongoing negotiations. Striking a balance between the benefits of a timing agreement and the potential burdens imposed by modifications becomes crucial in this evolving environment.
As regulatory agencies intensify the discovery process, there's a notable shift toward a more proactive approach. With an increase in the number of custodians, parties are forced to proactively collect data from custodians that may not be in play, and train TAR models before the agency has finalized the scope. This means that, on average, more data is being collected, reviewed, and produced, by virtue of increasing data size, increased ambiguity in custodian choice, and increased need to get documents out the door.
The current trend suggests a one-sided shift where only the government benefits from timing agreements. Parties are increasingly forgoing these agreements, negotiating custodians independently, and engaging in a cost/benefit analysis to determine the best course for their clients. The potential for a reset in norms may arise as parties become comfortable without timing agreements.
The landscape of timing agreements is evolving rapidly, influenced by regulatory changes, increased scrutiny, and shifting priorities. Whether a party chooses to enter into a timing agreement is now a nuanced decision, requiring a careful assessment of the costs and benefits. As the antitrust landscape continues to unfold, businesses must adapt and navigate these changes strategically to ensure a fair and timely review of their transactions.