eDiscovery Market Growth Driver: Things are Getting Less “Civil” by the Day

Much has been made of Gartner Group’s most recent forecast of the eDiscovery market, namely a 25% spike in business in 2009 with growth continuing at a 20% clip in 2010.  These heady numbers – in the midst of a lingering global recession, no less – garnered many headlines when announced earlier this week.  For some (but not all) in the eDiscovery industry, this healthy growth portends a banner 2010, with fully 52% of large cap respondents to Fulbright & Jaworski’s 2009 litigation trends survey anticipating more “legal disputes” in 2010. 

But lost in the headline numbers is an analysis of exactly where this growth is coming from; unlike years past when civil litigation was the main growth driver, 2009 and 2010 are all about regulatory investigations.  A quick glance at some of this week’s headlines makes this abundantly clear – which is especially ironic considering the EU’s decision to settle its decade-long anti-trust pursuit of Microsoft.

• Intel sued by FTC: With all due respect to Credit Suisse, perhaps no news this week was more eye-opening than Intel’s latest blow: the US’s FTC suing the chip giant in an effort to “stop…a decade of illegal sales tactics that hobbled competitors in the semiconductor market.”  This is on top of the EU’s massive €1 billion fine in May, 2009.  The good news for Intel?  2010 can’t possibly be as challenging as 2009, with the EU’s massive fine to go along with a lost lawsuit against hated rival AMD to the tune of $1.25B.  At least, that’s their hope…
• Credit Suisse Settling with the US for $536M: Under a deferred prosecution agreement with the DOJ and NY Attorney General, the Swiss banking giant is paying to settle charges that it funneled hundreds of millions of dollars to some blacklisted governments against US and New York law, including Iran, Libya and Sudan.  As big a fine as $536M is, it pales in comparison to Swiss rival UBS’s $780M February, 2009 payment to the IRS for the bank’s role in helping clients evade US taxes – which also resulted in the disclosure of thousands of names to the US tax authority.
• Massive new bonus taxes in UK, France: Not to be outdone in their end-of-year gift giving, the governments of the UK and France have responded to voter dismay over banker bonuses by slapping financial “fat cats” with 50% taxes on such bonuses.
• Numerous SEC investigations: True to its word, the SEC has ramped up its investigations and prosecutions of nefarious activity, the latest salvo coming in the form of multiple insider trading investigations and prosecutions.
• Banks scrambling to get out from under government control: US banks seem to be tripping each other in an effort to get out from under Uncle Sam’s thumb, with Wells Fargo and Bank of America the latest to head for the TARP exit for any one of several reasons, including pay limitations, overly zealous scrutiny and huge capital reserve requirements.  This scramble has been so haphazard that it has led to infighting, lost pride and a few PR issues for the Treasury Department.

2010 shapes up to be a big year in the eDiscovery market, but not for the usual reasons of growth in civil litigation.  This time around, regulators are taking the lead – and they don’t appear to be letting up anytime soon.