[co-authors: Jeff Grobart, Fernando Delgado, Jonathan Alef, Gillian Malloy Smith, Matt Korst and Micheal Recker]
From increasing regulatory scrutiny to the best way to handle modern attachments, experts share their insights, best practices, and projections to help organizations and law firms prepare for upcoming Second Requests.
Introduction
By Bill Mariano
Chief Revenue Officer
Receiving a Second Request from a regulator as part of an antitrust review of merger and acquisition (M&A) activity has always triggered significant stress for responding organizations and their legal counsel. The deadlines for Second Requests are often more aggressive than other legal actions and require following an onerous set of procedures and protocols. When the fate of a key transaction is at stake, there’s little room for error and none for delay.
The past year has been no exception. Increased M&A activity and regulatory scrutiny, combined with exploding data volumes and evolving data types, escalated the burden of Second Requests for the legal teams handling them.
To help provide a lens into the current Second Request environment, we polled a group of experts across a span of subject matter areas—from legal and information governance to artificial intelligence (AI) and document review—asking them to provide insights into the challenges and trends they’ve seen this year. Second Request experts also dove into new innovations that can make the process more efficient, best practices to streamline Second Requests, and a look ahead at what the future holds.
Before digging into individual expert perspectives, let’s look at some of the yearly stats related to Second Requests, developments in the regulatory environment, and what we’ve seen firsthand at Lighthouse.
Second Requests: By the Numbers
According to the most recent reporting by the Federal Trade Commission (FTC) and Department of Justice (DOJ), Fiscal Year (FY) 2022 was a busy year for mergers and acquisitions, with 3,152 transactions reported during that period. This rates as the second highest number of reported transactions for a year in the past decade. Only the prior year, FY 2021, had more transactions, with 3,520 reported.
Of those transactions, 47 were subject to a Second Request. While this number is consistent with the average number of Second Requests issued over the last decade, the percentage of Second Requests issued in relation to overall eligible transactions—1.6%—represents a significant drop compared to previous years.
But while the regulators may have used the Second Request process on a smaller percentage of transactions, the same report found that nearly two-thirds of mergers subject to Second Requests were either abandoned or voluntarily restructured.
Also of interest are the industries most targeted by antitrust regulators. In the report for FY 2022, the FTC and DOJ highlighted merger challenges in consumer goods, healthcare and pharmaceuticals, technology, and energy industries. Within the energy industry, Congress has also begun to urge more scrutiny by the FTC of oil and gas company deals.
Current Regulatory Considerations for Second Requests
Understanding the regulatory environment is the key to any M&A activity. There were a considerable number of developments in 2023 that affected these transactions and the Second Request process.
New merger guidelines published by the FTC identify procedures and enforcement practices used by both the FTC and DOJ when investigating mergers for antitrust law violations. These guidelines codify the regulatory response to harms caused by what the US government deems as “excessive corporate consolidations” with more vigorous merger enforcement.
Proposed changes to premerger notification rules in the Hart-Scott-Rodino Antitrust Improvements Act (HSR) could potentially increase the burden of information required in filings for parties entering mergers. This could give regulators more latitude in rejecting mergers for not complying with technical filing requirements. Included in these potential requirements are:
- All Item 4(c) and 4(d) documents, including drafts, reviewed, or prepared by a supervisory deal team lead
- English translations of all non-English documents submitted with a filing
- A detailed draft agreement or term sheet
Finally, the DOJ and FTC updated their preservation requirements for Second Requests, specifically to include ephemeral messaging and other communication and collaboration data. These modern data types include those created by Microsoft Teams, Slack, and Google Chat messages, to name a few.
What We Saw at Lighthouse in 2023
Velocity behind new Second Request engagements at Lighthouse is on a noticeable upward trend. Our team is on track to handle nearly as many Second Requests in the first quarter of calendar year 2024 than we handled in all of 2023.
This trend could have many causes. It’s possible that M&A activity is picking up, while increased regulatory scrutiny could result in a higher rate of Second Requests than in prior years.
As you prepare to respond to a Second Request, consider the insights and best practices provided by Lighthouse experts. The process can be challenging and stressful, but partnering with experts can help lighten the load.
Top Challenges in Second Requests
2023 was a year of diverse challenges related to data for legal teams facing Second Requests. Data volumes continued to grow and show no sign of stopping—but volume is a longstanding challenge and should come as no surprise to anyone. What has become a compounding factor for data volumes is the explosion of modern data types spurred on by the development of communication and collaboration tools, productivity solutions, the rapid adoption of generative AI products at the enterprise level, and the increasingly blurred lines between personal and work devices used for business purposes. Regulatory scrutiny has increased in response, an added challenge for law firms and corporate legal teams. Here’s what experts had to say about the top challenges organizations and law firms faced in 2023.
“In 2024, we have already seen a number of Second Requests stipulate collection and production of cloud attachments. For organizations in Microsoft 365, this requires use of the Purview Premium eDiscovery tool. Those organizations (and the law firms representing them) absolutely need to have a strategy in place to address data retrieval from M365 to ensure they are able to meet the timelines and regulatory requirements for data collection in Second Requests. This means ensuring that 1) the organization has the proper M365 licensing to do so, 2) that either the organization, law firm, or eDiscovery provider handling the Second Request has the required expertise to collect the relevant data (the availability of which will depend on the specific configuration of the M365 platform), and 3) that they also understand how the data collected will be handled downstream (during search, review and production stages)—taking into account continual changes in the M365 platform, changes in the client’s M365 ecosystem, and emerging industry standards that govern eDiscovery of M365 data.”
John Collins
Executive Director, Information Governance
"It has become evident over the last two years that the 'traditional' approach to document review—i.e., staffing large armies of document reviewers to move through data populations—is no longer a viable option to meet Second Request deadlines in a cost-effective manner while maintaining quality. That 'brute force' review method is simply not capable of handling the wide array of new data types, let alone the sheer volume of data, we’re now seeing in most Second Requests. When considering document review providers, it is critical for antitrust counsel to differentiate between those that function primarily to staff review teams, and those that also architect and implement technology-enabled review workflows. Review teams must still be able to scale to meet the accelerated timelines of a Second Request. But more importantly, clients need document review providers who are effectively incorporating technology into every phase of the Second Request review lifecycle—from sophisticated AI models to applications that detect personally identifiable information (PII) and apply redactions. Additionally, having demonstrable knowledge and experience reviewing modern and complex data types is also now essential, as collaboration and mobile data are as commonplace in Second Requests as email and laptop data, and each requires their own review strategies and quality checks.”
Cassie Blum
Senior Director, Review Consulting
“Shared links (i.e., documents shared by chat or email via a link to a file, as opposed to a physical attachment) continue to be a pain point in Second Requests. In recent months, we have been seeing a shift with electronically stored information (ESI) protocols for the FTC and DOJ, which are now requiring shared and/or cloud attachment linking. There is case law that can help counsel argue against modern attachment requirements based on proportionality considerations.
While Microsoft has introduced a solution that allows companies to retain, preserve, collect, and export shared versions of documents referenced in a communication, there are also important impacts for counsel and organizations to keep in mind when using this collection export format. If they are not familiar with those impacts or best practices, they will need to ensure they have consulted with M365 experts who are.”
Kamika Brown
Associate Director, Client Experience
“With the ever-growing scope of Second Request data volumes, getting a grasp on the most important facts in the dataset that is being produced to the government is becoming harder for legal teams every year. Relying on keyword searches or review teams to find the key information that regulators are interested in is ineffective in modern Second Request datasets and risks putting antitrust counsel at a disadvantage. It is critical that counsel develop a sound plan, as early as possible, for extracting that key information during the process of compliance to avoid delays and unwanted surprises.”
Jeff Grobart
Senior Director, Review Intelligence
The Growing Role of AI in Second Requests
The rapid rise of generative AI has ushered in a renaissance of sorts for AI. Legal teams are increasingly comfortable leveraging existing predictive AI and technology-assisted review (TAR) options built with Large Language Models (LLMs), thanks to the overall rise in awareness about the capabilities of AI. Second Request experts weighed in with their observations about the rise in AI use over the past year.
“Traditional TAR solutions brought the power of classical machine learning techniques to discovery practitioners over a decade before AI started transforming the world around us. These classical machine learning techniques leveraged word frequency analysis to achieve remarkably high accuracy in the classification of documents. Since then, newer, transformer-based approaches to text analysis called Large Language Models (LLMs) have evolved, leveraging substantively more complex architecture uniquely adept at capturing the previously elusive syntactic, semantic, and context-based properties of language.
Bolstering standardized TAR workflows with LLMs brings TAR to the current state-of-the-art in predictive AI, enabling eDiscovery practitioners to benefit from unprecedented efficiency and scale. In practice, a TAR workflow configured with an LLM allows responsiveness and privilege models to mature at a faster rate with few iterations, while also increasing overall precision and recall when compared to traditional TAR alone.
Second Requests are very exacting in terms of timelines and often come with punishing data volumes to analyze. There is no reason not to leverage LLMs to supercharge TAR and get your predictive AI house in order to address these contemporary Second Request challenges.”
Fernando Delgado
Senior Director, AI & Analytics
“Advancements in predictive AI solutions is the first step in addressing the challenges clients and counsel teams are facing from the exponential growth of data in Second Requests. Thankfully, additional technologies and processes are currently being developed to help drive the efficiency and effectiveness of these reviews. One such leading solution is the incorporation of gen AI empowered workflows.
Utilizing gen AI to assist with seed set identification allows for a richer initial set of training documents, resulting in fewer training iterations and increased accuracy of the resulting model. These better performing models help reduce the risk and costs associated with non-relevant documents going through subsequent workflows. Gen AI can then be applied to right sized populations, enhancing workflows such as privilege logging, PII/PHI detection, and deposition preparation—further reducing the burden on antitrust counsel.”
Jonathan Alef
Senior Consultant, AI & Analytics
Tips and Best Practices to Prepare for Second Requests
There’s no question that Second Requests are veritable "pressure cookers" thanks to aggressive deadlines and the high stakes involved. Adequately preparing for a Second Request may seem difficult, if not impossible, given the unpredictable nature of regulatory scrutiny and fast-paced changes to scope and datasets we saw in 2023. But there are steps legal teams can take in advance of a Second Request that will help save valuable time, minimize unwanted surprises, and reduce the entire team’s stress levels. Second Request experts put together valuable tips to help legal teams better prepare for Second Requests in 2024.
“Law firms seeking to leverage predictive AI and TAR workflows on Second Requests should prioritize the following actions: (1) invest in comprehensive training and education programs for their legal teams and support staff to ensure adept navigation of these technologies in collaboration with trusted vendor partners, (2) assess the applicability and permissibility of these technologies within the ESI protocol, (3) foster transparent communication with clients regarding the utilization of these advanced tools, and (4) promptly establish clear parameters for TAR coding across subject matter experts to support efficiency and consistency.
Law firms additionally aspiring to tap into the potential of generative AI for Second Requests should prioritize the following actions: (1) cultivate a comprehensive grasp of data security protocols to uphold client confidentiality while employing generative AI tools, (2) collaborate with reputable specialists to deploy these technologies conscientiously and in accordance with ethical standards, and (3) promote transparency with clients concerning the application and constraints of generative AI tools, fostering an environment of trust and enabling well-informed decision-making processes.”
Gina Willis
Associate Director, AI & Analytics
“It’s never too soon to start planning for document review in a Second Request. Antitrust legal teams that engage in early review workflow planning conversations often garner the most effective use of technology to streamline their workflows and reduce overall review times.
While collections and processing are underway, assemble a draft protocol and start discussing technology-enabled review workflow strategies with your provider that contemplate first level, second level, and privilege review workstreams. In parallel, engage with your provider on technologies and processes to identify and hone privilege and sensitive data populations. AI-powered analytics have become an essential part of most Second Request reviews—and not just for the TAR responsiveness process. More advanced AI classifiers can help streamline the linear review phase, because they can more accurately identify potential privilege and personal information, while ensuring consistent coding and redaction treatment across the population.
Legal teams will need to be on the same page with the document review provider early in the process, to ensure the most effective application of these technologies with your planned review workstreams and coding palettes. Having these early dialogues to map processes to technologies will be a force multiplier for efficiency when review is ready to commence in any Second Request.”
Senior Director, Review Consulting
“Get started on fact development before or during the review process with a strategic search service or workflow. Experienced, dedicated search teams with Second Request experience can use advanced technology and linguistic analysis to find the documents legal teams need to know much earlier in the Second Request process than traditional search or review methods. This has been a real game changer for many of our law firm clients. It helps avoid unwanted surprises that might be hiding in the data, can supplement the TAR training process, and helps to ease the burden of learning and adapting to the fact patterns only after compliance has been certified.”
Senior Director, Review Intelligence
“On the corporate side, the best thing counsel and compliance teams can do to make a Second Request run more smoothly is to proactively understand and manage their data. Know what tools employees are using. Create and enforce policies for what programs can be used and where data can be stored. Enact and proactively manage a rigorous data retention policy. By creating structure around their data sources, it can streamline collections and reduce data volumes—which are the key driver to both cost and timelines in a Second Request.”
Senior Director, Customer Experience
“On the law firm side, the best thing counsel can do to streamline a Second Request is to set an expectation of transparent communication between their team, their client, and their eDiscovery provider on the deadlines and scope changes that impact workflows. Establishing transparent communication expectations with all parties involved in the Second Request, as early as possible, is crucial because it enables all teams to work backwards from deadlines to ensure the underlying work is completed on an incremental basis. It also enables each team to fully understand what is needed from them at various points in the Second Request. This includes—but is not limited to—custodial interviews, collections, data processing, TAR training, review, and production deadlines. Open communication and well-defined deadlines lead to a smooth and successful path to timely substantial compliance with fewer surprises.
Matt Korst
Director, Customer Experience
Second Request Outlooks
Predicting the future is never perfect, but past trends provide a strong indication of what’s coming next. Data volumes and variety, our dependence on technology, and the need for innovation are just some of the predictions Second Request experts have for the next year and beyond.
“With LLMs, we are at the dawn of a new information retrieval age. And because of the nature of Second Requests—which are time pressured and often have larger than average data volumes—I think we’ll continue to see more innovation and faster adoption within this practice area.
As that happens, I think one of the things that will arise is a greater understanding of how important human expertise is to that process. Historically, we’ve seen that as data volumes in Second Requests continue to explode, AI technology has evolved to keep up with the challenge—as long as the technology is implemented by those who expertly deploy it in rigorous, defensible workflows.
Our industry’s El Dorado is the 'AI easy button,' but those who are closest to AI technology recognize the critical role that experts play in wringing the most value from it. Expertise matters—whether that’s in the form of antitrust subject matter experts whose judgments are being modeled by AI or the technologists and AI experts that design and execute complex workflows that greatly reduce the need for manual document review in time-pressured Second Requests. And experience shows how important it is to understand where the 'human in the loop' is best situated.
The next two years will be an exciting time for AI innovation and adoption in Second Requests, and we’re excited to be advancing hand-in-hand with our clients to tackle their biggest challenges in this practice area.”
Lon Troyer
Vice President, Review and Advanced Analytics
“Regulatory scrutiny over how companies are handling communications data has increased substantially in the past few years. This includes supported applications, such as those hosted and provisioned by the company (e.g., M365, Google Workspace, Slack), and unsupported applications, such as third-party apps that may be downloaded on a company issued device or personal device managed by policy. Recent cases have made clear that a company is obligated to take steps to preserve this data if it is relevant to the investigation or litigation matter and the failure to do so can result in serious consequences. A company’s ability to retain, preserve, and collect this data, however, is highly dependent on the system’s capabilities and the specific configuration in place. Law firms will need to understand or partner with someone who understands these systems to preserve and collect that data quickly to meet Second Request requirements.”
Jamie Brown
Vice President, Information Governance
“The proposed changes to the HSR rules announced in 2023 will require parties to an HSR merger to collect and produce a lot more information at a much earlier stage in the regulatory review process. The DOJ and FTC have intimated that the rule changes will substantially increase the amount of time to prepare an HSR filing. The burden of the proposed rule changes to 'Item 4' (4(c) and 4(d)) documentation will essentially turn complying with that rule into a mini Second Request, requiring parties to collect and review terabytes of data in a short amount of time. Companies involved in HSR mergers—and the law firms that represent them—absolutely need to begin preparing for this. The positive outlook is that legal teams can use it as a forcing mechanism to find the key information buried within their data at a much earlier stage of the regulatory process. In effect, legal teams can use this as an opportunity to perform an early case analysis and assessment. It also helps identify quality documents to feed and improve AI and TAR responsive workflows used in the Second Request process.”
Chief Revenue Officer
“What we’ve seen so far in 2024 is an indication that Second Requests are going to keep getting more challenging from a data perspective for corporations. Regulators are heavily scrutinizing deals that are subject to Second Requests and rigid deadlines only ratchet up the pressure to get that data out the door. Yet data volumes continue to grow, and the variety of data types involved—collaboration, chat, ephemeral data, etc.—is evolving at a rapid pace. It will be increasingly important for corporations to find and partner with law firms and eDiscovery partners that have robust and battle-tested Second Request programs and the technology and expertise to provide an efficient end-to-end workflow. There is no time to develop collection, processing, or review strategies on the fly and the stakes are too high to take a stutter step once the process begins. Corporations that will be heavily involved with M&A activity in 2024 and 2025 should ensure they have solid law firm and eDiscovery partnerships in place well ahead of any potential Second Request activity.”
Sarah Barsky-Harlan
Executive Director, Customer Experience
“It will be increasingly important for antitrust counsel to get a grasp on their clients’ data volumes and types as early into the Second Request process as possible. The growing complexity of modern data will only exacerbate the increased regulatory scrutiny and merger challenges in Second Request we’ve seen over the past few years. All of this emphasizes how critical it is for antitrust firms—as their clients’ partner and advocate—to have a plan in place for how their clients’ data will be handled from collection to production in a Second Request. It also means that law firms must evaluate possible gaps within their own expertise and technology well ahead of Second Request work, and work to fill any gaps they find (either by hiring internally or partnering with eDiscovery providers). For instance, AI and advanced analytics workflows have never been more important in Second Requests. To stay competitive, law firms will need to ensure they have a plan in place to leverage that technology on behalf of their clients.”
Michael Recker
Executive Director, Customer Experience
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