Statement of the Federal Trade Commission's Bureau of Competition
On Guidelines for Merger Investigations

This is NOT the entire document. This segment deals with Electronic Production and Electronic Documents.  For the full text of the document, CLICK HERE

6. Electronic Production and Electronic Documents

Searching electronic files and submitting productions in an electronic format present challenges to a "one-size-fits-all" approach because of the great disparity in the types of electronic files maintained by companies and the mechanisms available for submitting documents electronically. Nevertheless, several factors suggest that we need to offer alternatives for the production of electronic documents. For instance, the number of electronic documents maintained by a typical company has increased dramatically and those documents often are not reduced to paper in the ordinary course of business. In addition, important information may exist only in electronic form and cannot readily be printed. As a result, we are offering options for: (1) acceptable formats for the production of electronic documents; and (2) the scope of searches we will request for electronic documents.

a. Electronic Production of Documents Responsive to a Second Request

Electronic production has become a cost-effective method of producing documents. It has been accepted, in various formats and with various degrees of success, by both us and the Department of Justice. In light of this, we intend to develop options for electronic production.

Instruction C of the Model Second Request states: "Computer files shall be printed and produced in hard copy or produced in machine-readable form (provided that Commission representatives determine prior to submission that it would be in a format that allows the agency to use the computer files)." In other words, parties may produce documents electronically only if staff determines that the production format would be "useable," and the instruction provides no guidance as to which "machine readable" formats would meet that requirement. As a result, most electronic documents have been produced in paper form. When we have received electronic files, they have been produced in a variety of formats, including native file formats, .tiff, and .pdf. We have also received productions via CD, "snap" drives, and third-party web sites.

Native file productions are unsatisfactory for various reasons, and production by CD often imposes an unacceptable burden on our resources. However, productions by .pdf format, accessed on the web, have proven to be extremely effective, for both the parties and our staff. In light of this, the Model Second Request will be modified to encourage the production of electronic files in specified electronic formats. However, both because we need additional experience with electronic productions, and because the technologies are evolving rapidly, we are not yet prepared to modify the Model to require the production and acceptance of electronic files. Rather, we intend to provide specific options, to be negotiated with the staff in each case. It will also be critically important for parties to provide staff with early and direct access to company personnel with expertise in each company's information technology and data systems.

The revised Model instruction will state that computer files - not including data subject to data requests - may be produced using one of several options, subject to agreement of the staff. Any such production will have to include a very basic index identifying the sources (author or custodian) and Bates ranges for each document. Parties will not be required to produce printed versions of electronic documents unless those versions are different from the electronic versions - for example, they may contain handwritten notes or signatures, date stamps, or other unique attributes. The production options available will be detailed in the Model Second Request, but they will include the following:

• in a searchable .pdf format, through a third-party web-based document review vendor providing FTC staff with secure and unlimited online web access and unlimited rights and access to download and print electronic documents;
• in a searchable .pdf format on CD-ROM or on an external network appliance such as a "snap server" or large hard drive (generally, this will only be acceptable if the volume of documents is relatively small);
• in an equivalent, searchable format, not including .tiff, produced either through a secured web site, or by CD-ROM or external network appliance (if the volume is not large); or
• in a .tiff format, if accompanied by a Summation document summary file including a variety of more detailed indexing requirements, where each .tiff file represents a separate record in the Summation file, and the .tiff files are at least 300 dpi image quality.

As we gain additional experience, we hope to modify these options, and possibly even move to a specified electronic production format as the required production methodology for electronic documents.

In many cases, production of electronic documents (or at least certain electronic documents) by electronic means is vital to substantial compliance. For example, printed versions of Microsoft Excel spreadsheets are inherently inadequate, because they do not include cell contents, comments, and formulas. Similarly, many programs generate conflicts when their files are printed on popular printers; such conflicts may, for example, eliminate or change underlined or bolded characters, or result in the failure to show the existence of attachments. Further, electronic documents contain "metadata" - embedded data that does not print with the document, but which includes vital information such as bibliographic data about the document and the names of the recipients of "blind" copies on emails. Fortunately, producing electronic documents by electronic means is likely to be considerably less expensive and time-consuming than producing printed versions of such documents.⁽¹⁰⁾

We received many statements to the effect that it is often difficult and costly to respond to second request "data" specifications. However, data specifications often generate critical information for our investigations. On November 7, 2002, the Bureau of Economics announced suggestions for best practices in providing data, economic, and financial analyses in investigations. We encourage parties to consider and follow these suggestions.

b. Use of Term Searches

Staff frequently is asked to agree that a production resulting from a term search will be sufficient, regardless of the number of documents the search produces. Staff also has been asked to edit and provide input on the acceptability of terms to be searched. While a prohibition against term searches for parties' increasingly voluminous electronic document databases seems unreasonable, so does a request to agree, in advance, that a specific term search is all a party need do, regardless of the search's efficacy. We view term searches as a mechanism which, if used properly, may enable parties to respond adequately, up to and including substantial compliance. A thorough and well-executed term search of electronic files may be an efficient way to respond to a second request, just as a thorough and well-executed physical review may be.

As with more traditional methods for searching for responsive documents, staff will work with parties to help ensure that term searches are thorough and complete. Also like other second request issues, this is an area in which early discussions with the staff, in which key personnel from the company are directly involved, can make a difference. While this will be a case-by-case issue, we are providing suggestions for steps parties can take to improve the likelihood that their term searches will be sufficiently comprehensive. Specifically, parties should consider the following possible options:

• providing, at the earliest possible time, organizational charts and information on data and document flows and systems so that the staff can evaluate the search methodology;
• providing a glossary of industry and company terminology;
• providing proposed search methodologies (including the applications that will execute the search) and the results of a sample search or searches so staff can evaluate how the search is working;

• submitting a rolling production, so any deficiencies can be detected and corrected;
• in certain cases, agreeing that certain key employees' files will be physically reviewed in addition to, or in lieu of, being term-searched;
• in certain cases, agreeing to safeguards such as a stipulation to produce any responsive documents not identified in the term search, but identified by other means, before certifying substantial compliance, or a stipulation that documents not identified in the term search will not be used or cited by the parties before the Commission or in litigation.

c. Searches and Productions of Archives and Backup Systems

Definition C of the Model Second Request includes archives and backups as documents subject to search. Many commentators have stated that this is expensive and may be duplicative. However, in our experience, in some cases the search of even a small portion of the parties' archive and backup systems produces valuable information that is helpful to the staff's investigation. As a result, we cannot eliminate the requirement that parties search archive and backup systems. However, in order to facilitate case-by-case solutions to the problems posed by searching archive and backup systems, we intend to revise the Model Second Request to include separate language relating to the search and production of documents from those systems, and to provide a range of modification options from which the staff will be able to select, based on information the parties provide. These options will range among the following:

• excluding searches of archives and backups (possibly with some right for the staff to request follow-up searches if it appears that files are inexplicably missing from the company's "live" files);
• negotiating significant limitations to the portion of archives and backups that needs to be searched and produced (either by person, dates, or terms/specifications); or
• requiring a more inclusive search and production, similar to what is included in the current instructions of the Model Second Request.

By making these options publicly available, we hope to encourage parties to actively and cooperatively negotiate with the staff. In order to quickly and effectively negotiate any modification to the requirement that the parties search archive and backup systems, the parties should request a call with investigating staff and IT personnel from the company and the FTC to discuss information about the archives and backup systems.

d. Search and Production of Email

Email has become the primary means of corporate communication, and in many recent merger investigations has been of tremendous importance. However, email also has been responsible for much of the increase in the volume of second request responses, even when the parties make a good-faith effort to weed out unresponsive or irrelevant emails. Accordingly, staff has been instructed to offer options to tailor the second request to the new reality of email. The availability and choice of options will be largely determined by the parties' willingness to promptly provide accurate information about their email systems and their organizational structures, employees and responsibilities. As with other issues subject to modification, the most effective means of limiting the volume to be produced will be to reduce the number of people searched. Alternatively, term searches may substantially reduce the volume of email produced. Another option which the staff will consider in each case is reducing the time period of the search of emails for different levels of an organization. For example, in a particular investigation, the staff may be able to agree that personnel in particular organizations, or below certain levels of seniority, only need to have the most recent year's emails searched; higher-ranked personnel, or persons in organizations more likely to generate relevant documents, may have to have two years of email searched; and the most senior company officers and executives may be subject to a three-year search.