On August 16, 2024, the Federal Trade Commission (FTC) filed a motion in limine in its challenge to Kroger’s $24.6 billion acquisition of Albertsons alleging that Albertsons executives intentionally deleted text communications about the merger.1 The FTC’s motion asked the court to infer that the executives’ allegedly deleted communications would have been harmful to the companies’ defense of the merger. In addition to seeking an adverse inference about the content of the responsive text messages, the FTC requested that the court “treat with skepticism” any trial testimony from certain Albertsons executives, including CEO Vivek Sankaran, about the effects of the proposed merger or the parties’ planned divestitures.2
Ahead of the preliminary injunction trial, which commenced on August 26, 2024, the court agreed that Albertsons failed to take reasonable steps to preserve the text messages and that the loss of these messages would prejudice the FTC. Nonetheless, the court denied the FTC’s request for an adverse inference because the FTC did not demonstrate that Albertsons intended to deprive the FTC of the text messages under Federal Rule of Civil Procedure 37(e). Instead, the court will allow the FTC “to examine in depth the four witnesses practice of deleting text messages and will treat with skepticism claims regarding those texts.”3
The FTC’s motion reflects the antitrust agencies’ recently intensified commitment to ensuring that companies and individuals that are the subject of antitrust investigations fully comply with document preservation obligations, especially for “ephemeral” and encrypted messages.4
Despite the court’s ruling in this case, the agencies are likely to continue litigating discovery issues to deter companies from failing to comply with the agencies’ updated discovery guidance.5 This Alert reminds companies that it is crucial to take all actions necessary to preserve any communications involving key employees during antitrust investigations and litigation.
Background
The FTC has been investigating Kroger’s acquisition of Albertsons since November 2022. The FTC accused Albertsons of violating its document preservation obligations by failing to preserve and produce complete text conversations from key witnesses in discovery. For example, texts from Todd Broderick, Albertsons’ Division President for Colorado (“one of the key geographic markets” where the parties compete according to the FTC), were allegedly produced with only one side of the several responsive conversations and omitted Mr. Broderick’s texts. Albertsons claimed that omission of Mr. Broderick’s texts “may have been because of settings on the iPhone that automatically delete files after a period of time.” The FTC argued that the use of “auto-delete” features is irrelevant to the analysis because “an employer’s decision to give individual employees discretion to decided how and what to preserve is sufficient to show willful destruction of evidence.”
Additionally, the FTC alleged that Albertsons CEO Vivek Sankaran and two other executives continued to delete text messages that likely expressed “candid opinions” about the merger and the divestiture proposal during the investigation. While some deleted messages were ultimately recovered, the government claimed that Albertsons deliberately delayed producing the recovered messages until after those executives were deposed. Furthermore, the FTC indicated that its investigation into these omitted texts revealed that some executives had strategized to delete texts that expressed negatives opinions about the merger but preserve and produce texts that highlighted the merger’s procompetitive benefits.6 For example, Mr. Broderick preserved texts that included “sentiments defending the proposed merger” that he sent three days after the conversations where his part of the conversations were omitted allegedly due to auto-delete features.
The court ruled that the FTC did not “demonstrate the requisite intent to warrant imposition of an adverse inference” and therefore declined to apply a presumption that the content of the four witnesses’ deleted texts was unfavorable to Albertsons’ defense. But the court is allowing the FTC to continue investigating whether Albertsons is withholding key communications from the government and will allow the FTC to question witnesses at trial regarding their texts, which could harm their credibility with the court.
Message Preservation Guidelines for Companies
In January 2024, the antitrust agencies announced updates to their discovery requests to “ensure that neither opposing counsel nor their clients can feign ignorance” when they are required to preserve and produce all responsive documents from modern collaboration tools.7 In response to these enforcement updates and measures, companies should consider the following actions as soon as they anticipate a government investigation or litigation:
- Conduct diligence to understand each type of messaging platform employees subject to a legal hold use for business communications, whether on company devices or personal devices.
- Develop clear policies to ensure auto-deletion features on mobile devices and third-party messaging platforms are disabled in the event of an investigation or litigation.
- Develop and review company policies on employee use of ephemeral message applications, such as Signal, Slack, and Microsoft Teams, as part of compliance training.
- Consider using technical solutions to automatically save and preserve messages from messaging applications.
- Upon anticipating or learning of an investigation, ensure that messages on all platforms used for business communications are preserved and readily accessible, including by:
- instructing the IT department to disable any auto-delete functionality on company-issued devices;
- ensuring that employees cannot reenable auto-deletion themselves on company-issued devices;
- contacting outside vendors to image mobile devices of high-level employees and potential key witnesses;
- ensuring that the company’s litigation hold notices include provisions that instruct employees to preserve encrypted and ephemeral messaging, both on company and personal devices;
- requiring document custodians to acknowledge understanding of and compliance with preservation obligations on all devices used for business communications (including personal devices if they contain information relevant to the investigation; and
- warning employees that will serve as document custodians about the consequences of failing to preserve their messages.
For comprehensive guidance on complying with increasing requirements for document preservation in antitrust investigations, companies should review our previous client alert discussing the joint statement from the FTC and the U.S. Department of Justice in February 2024 reiterating the obligation for companies under investigation by the agencies to preserve relevant documents, including ephemeral messages.8
[1] Plaintiffs’ Motion In Limine For An Adverse Inference, FTC et al. v. The Kroger Company and Albertsons Companies, No. 3:24-cv-00347-AN (D. Or. Aug. 16, 2024).
[2] Id.
[3] Opinion and Order, FTC et al. v. The Kroger Company and Albertsons Companies, No. 3:24-cv-00347-AN (D. Or. Aug. 25, 2024).
[4] “DOJ and FTC ‘Signal’ That Companies Cannot ‘Slack’ on Preserving Ephemeral Messages”, Wilson Sonsini (February 21, 2024), https://www.wsgr.com/en/insights/doj-and-ftc-signal-that-companies-cannot-slack-on-preserving-ephemeral-messages.html.
[5] Press Release, U.S. Dep’t of Just., “Justice Department and the FTC Update Guidance that Reinforces Parties’ Preservation Obligations for Collaboration Tools and Ephemeral Messaging” (Jan. 26, 2024), https://www.justice.gov/opa/pr/justice-department-and-ftc-update-guidance-reinforces-parties-preservation-obligations.
[6] Note 1. Supra at 6.
[7] Note 5.
[8] Note 3, supra.
