Preliminary Investigations

• Pages: 49-69

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CHAPTER III

PRELIMINARY INVESTIGATIONS

A. The Stages of Division Civil Investigations

1. Initiating the Investigation

The Division’s initial inquiry into potential wrongdoing involves the

question whether to open a so-called “preliminary investigation” (also

called a “PI”). There are several paths that the Division can take in

initiating a preliminary investigation. In the merger context, the Division

predominately investigates transactions subject to the formal notification

and waiting period requirements of the Hart-Scott-Rodino Antitrust

Improvements Act (HSR Act). But it can also investigate transactions not

reportable under the HSR Act and has increasingly chosen to do so. In

addition, the Division can initiate preliminary investigations into other

types of potentially anticompetitive conduct based on complaints from

citizens or businesses, its staff’s general monitoring of the industry and

legal developments, or an inquiry from Congress or another agency.1

2. Obtaining Clearance

The Division and the FTC share jurisdiction over civil enforcement

of most potential antitrust violations in most sectors of the economy. The

process through which the agencies decide which of them will conduct

the investigation into particular conduct or a merger is called

“clearance.” Clearance is governed by a series of formal and informal

agreements between the Division and the FTC.2

1. Initiating an investigation is discussed in mor e detail in Section B below.

The initial investigation of mergers is discussed in detail in Chapter

V.B.1. and initial investigations of civil conduct are addressed in Chapter

VI.A.

2. Clearance procedures are discussed in Section C below. Clearance

procedures are also addressed with regard to merger investigations in

Chapter V.B.1 and in C hapter VI.A. for conduct investigatio ns.

50 DOJ Civil Antitrust Practice and Procedure Manual

3. The Investigative Plan

Once Division staff receives approval to open a preliminary

investigation and clearance from the FTC, it develops an investigative

plan. The investigative plan lays out the investigation’s focus including

the theory of competitive harm the Division would pursue, how (and

over what time frame) it would propose to develop the relevant facts, and

how it would propose to remedy a violation if it found one.3

4. Deciding Whether There Is a Problem

The Division uses the preliminary investigation phase to decide

whether there may be a concern warranting enforcement action or, as to

HSR-notifiable transactions, a Second Request investigation. In the HSR

merger context, the Division staff makes the initial determination during

the HSR waiting period of whether there is sufficient concern about the

transaction to merit an in-depth Second Request investigation. If the

transaction raises no substantive issues, the Division staff may grant

early termination, allowing the transaction to close before the expiration

of the initial waiting period. Otherwise, the Division staff will inform the

parties whether it anticipates issuing a Second Request near the end of

the waiting period. If the Division staff raises concerns, the parties can

provide an additional period commensurate with the initial waiting

period by “pulling and re-filing” the merger notification. The Division

staff primarily determines if there may be a problem based on its review

of the documents provided in response to Items 4(c) and 4(d) in the HSR

form, but it also considers any complaints from third parties, publicly

available information, and Division experience with the industry.4 When

investigating conduct (and mergers in the HSR setting), Division staff

uses its preliminary investigation to determine whether to close the

investigation without enforcement action. Staff usually will then inform

the parties of the proposed recommendation and generate a formal

memorandum recommending a particular disposition of the investigation.

3. Early investigatio ns and the investiga tive plan are desc ribed in more

detail in Chapter V.B. with regard to mergers and Chapter VI with regard

to conduct.

4. More information on the merger review process can be found in Chapter

V.B.1-2.