Thursday, July 12, 2007

Emailing, and AntiTrust

As an old FTC guy, I do appreciate the problem here:

I used to tell clients that they had a mistaken image of FTC lawyers as impartial regulators interested in nothing more than truth and justice; in fact they were eager and ambitious litigator/prosecutors looking to put notches on their holsters. These notches would lead to advancement in the agency or to lateral partnerships at Wall Street firms. Some of my best friends advanced this way. So that when you gilded the lily by overstating or misstating the reasons for an acquisition in some ill-chosen memorandum (usually written by the investment bankers), you were creating good old-fashioned understandable evidence.

In this case, the Whole Foods CEO sent an e-mail to the board listing as the top two reasons for the acquisition: "Elimination of an acquisition opportunity for a conventional supermarket" and "Elimination of a rival." Two reactions: (1) Damn! You can do all the training and prophylactic work you want with your business people, but CEOs still write these damn e-mails (which constitute 4(c) documents) without showing them to you, the general counsel; and (2) I could re-write the two reasons to say almost the same thing without the incendiary effect: "Enhance our ability to compete against the more powerful and resource-laden supermarket chains who are bound, in view of the low barriers to entry, to provide the kinds of natural and organic products we do" and "Achieve cost, marketing, and sales synergies through rationalization of locations, more efficient advertising budgets, and other efficiency moves."

General Counseling 101: If the CEO had sent the draft e-mail to me, we would have had the following conversation:

Lipshaw: "The e-mail is fine if that's what you really mean, but I think you are using loose language and it comes out contrary to your intent."

CEO: "Huh?"

Lipshaw: "You have made it sound like you are trying to eliminate competition, when in fact you know that Kroger, Safeway, Meijer, and Winn-Dixie could crush us tomorrow in one fell swoop. Marsh in Indianapolis is already taking share from us with their organic and natural section. So "eliminating" Wild Oats wouldn't do a damn thing."

CEO: "That's true."

Lipshaw: "So why write it that way? It's red meat to the FTC carnivore! You don't need this puffing to persuade the board it's a good deal."

CEO: "How would you do it?"

Lipshaw: "Doesn't this sound more like why we are REALLY doing this deal?" [Reads bullet points from above].

CEO: "Yeah! That's good. Read again to me slowly so I can get it down."


Absolutely right, on the "notches on the holster" bit. It may be "notches on the lipstick case," but still. In 1984, at the FTC, I was an economist, and my (at that point, future) wife was an attorney.

I spent my time thinking of reasons why mergers enhanced competition. And she and her lawyer pals spent their time thinking of ways to kill all the economists. You only get experience litigating by...litigating. FTC lawyers did NOT take that pay cut so they could sit around and serve the public.

(Nod to Mr. Zorro, who knows a lot of stuff he can't say)