Due to rapid technological advances in recent years, the merger control environment has made room for dynamic, highly technical mergers. The lack of understanding of certain sectors or the degree of complexity of certain transactions can generate confusion as to the possible harm theory put forward by the competition authority.
This lack of knowledge of the emerging industries has, in turn, contributed to significant demands for information from the competition authorities. In the past, the number of documents requested from the Commission was several hundred, while now the number has risen to several hundred thousand. The Commission relies heavily on internal documentation to determine the markets and the plans of the parties concerned.
Deadlines may not be proportionate to the amount and scope of the information requested. Responding to an RFI that refers to thousands of documents requires access to resources that some respondents might not have access to. Having regard to the above,
It is clear that an undertaking seeking to make certain statements of legal privilege would be in a challenging position. Consequently, the disproportionate volume of knowledge demanded by the Commission essentially violates the principle of legal professional privilege. The Commission may, however, decide to stop the clock in the merger control proceedings until the request for internal documents has been complied with, in order to prevent the merging parties from withholding internal documents.
Obviously, legal professional privilege plays a more important role in complicated merger proceedings than it used to be.
Legal professional privilege
have not been specifically established in the sense of merger regulation. EU case law on legal professional privilege applies to monopoly proceedings and so far there is no EU case law on acquisition cases. However, legal professional privilege have been accepted as a constitutional right and cannot therefore be disregarded in the sense of merger control proceedings.
In view of the lack of jurisprudence on legal professional privilege in the sense of merger regulation, we will have to look at the past actions of the Commission which suggests a narrow interpretation of EU case law on legal professional privilege. In practice, case teams should be more versatile in view of the increased volume of papers. This does not prohibit the Commission from investigating legal professional privilege arguments more closely nowadays. Claims for legal professional privilege bring a major logistical burden to the work of the parties. Legal professional privilege arguments are made in privilege logs, which must set out the reason why a document or part of it is protected by a legal professional privilege.
There are two practical considerations that need to be addressed in relation to responsive documents protected by legal professional privileges and responsive documents covered by the regulations on legal professional privileges in a third country.
Responsive records protected by the EU rules on legal professional privilege
Written correspondence by an independent EU trained counsel to their client in the course of a merger control case are protected by legal professional privilege. Communications not related to competition law cases, such as communications in relation to other fields of law, such as employment or taxes, are not subject to legal professional rights.
In addition, correspondence dated prior to litigation in the field of competition law can be deemed not to be subject to legal professional privilege provided that they are not relevant to the proceedings.
Company documents representing the legal advice provided from external counsel shall be subject to legal professional privilege. However, it is very common for company documents providing legal advice to also deal with other non-legal issues. In such instances, the records would be partly rewritten.
Responsive documents protected by legal professional privilege in third countries
Where advice is received from external counsel who are not EU eligible, the advice does not fall within the scope of EU legal professional privilege laws. The problem is becoming more difficult for transactions with an international dimension, in which several competition authorities are investigating transactions.
It is very normal for the authorities to seek a waiver of confidentiality from the parties in order to be able to share information with other competition authorities. If that is the case, the various ways in which legal professional privilege laws are enforced across the world may become problematic, provided that some are less stringent than others. Where this is the case, a document obtained by one competition authority might be revealed to another competition authority, which does not usually have access to under the legal professional privilege of its jurisdiction. In that regard, it is very normal that the documents sought by the Commission fall within the scope of the US legal professional privilege, but not the EU legal professional privilege (e.g. in-house counsel communications), which could constitute a waiver of the US legal professional privilege.
Here are some examples of correspondence and records and their respective treatment of legal professional privilege by the Tribunal.
Communication between the client and the external lawyer: correspondence originating from the client’s external legal counsel is subject to legal privilege. However, the same does not necessarily apply to correspondence between the client and the external legal counsel. Such communication should have been justified in the privilege log.
Internal notes representing external legal advice: In Hilti, the Court ruled that ‘internal notes which are restricted to the reporting of the text or substance of such communications’ to an independent lawyer with legal advice are entitled to legal professional privilege.
The Commission also interprets the reading of Hilti very broadly to the extent that only documents providing solely legal advice are covered by legal professional privileges. The main message from Hilti, however, is that the substance of legal advice must be preserved irrespective of the type of communication it involves. In practice, the Commission will ask for the partial drafting of documents that are partially covered by legal professional privileges.
Legal advice not relevant to antitrust proceedings: decision-making procedure in cartel cases suggests that legal professional protection extends to written correspondence between the client and his counsel after the start of the proceedings and can also apply to earlier communications where there is a connection with the subject-matter of the proceedings. In the sense of merger regulation, previous correspondence between a lawyer and his client are protected by legal professional privilege if there is a connection with the subject matter of the proceeding for a particular transaction. Legal advice relating to alternative transactions will also not be subject to legal professional privilege.
Correspondence with economists: professional legal privilege is limited to correspondence with lawyers. There is no EU case law on communications with economists in merger situations. Moreover, the Commission’s Best Practices Notice explicitly states that legal professional privilege do not apply to other occupations, and therefore it would be difficult to demand legal professional privileges for correspondence with economists. However, advice received from economists, but reviewed by an external lawyer, is likely to be subject to legal professional privilege. The substance of communications with economists may be integrated into the legal advice of an external lawyer, which is clearly subject to legal professional privilege.
In short, the legitimate professional privilege of merger regulation has gained a new meaning. In order to ensure that the legal professional privilege in documents or correspondence is not violated by the large number of documents required, it is imperative that businesses have developed appropriate processes in advance to respond to possible demands for documents from the competition authorities.
In addition, even in circumstances where legal professional privilege would not normally apply, there may be ways to prevent disclosure of documents. Communications from EU qualified external lawyers are likely to be subject to legal professional privileges. By incorporating information obtained from other professionals in this communication, there is a potential to extend the application of legal professional privileges to advice obtained from other professionals. However, this means that there is no clear contact between the undertaking and the other professionals.