On August 24, the FTC announced that it had reached a proposed settlement with New York-based hedge fund management company Third Point LLC and three affiliated funds (collectively, “Third Point”) in connection with a complaint filed on the same day in the U.S. District Court for the District of Columbia. The complaint alleged that, in August 2011, Third Point LLC’s acquisitions of shares of Yahoo! Inc. on behalf of three of its managed funds had triggered the Hart-Scott-Rodino Act’s (HSR Act) notification and waiting period requirements, and that the funds did not qualify for any of the exemptions from such requirements that the HSR Act provides. In particular, the complaint alleged that the filing exemption for acquisitions made “solely for the purpose of investment,” 16 C.F.R. § 801.1(i)(1), did not apply because Third Point and its agents had undertaken activities inconsistent with such a purpose, including deliberations and public statements regarding proposed changes to Yahoo! Inc.’s board of directors and communications with third parties about their interest in becoming the CEO or a board member of Yahoo! Inc. The funds subsequently filed the required notifications in mid-September 2011.
Pursuant to the stipulated final judgment, which currently is pending public comment and court approval, the Third Point funds will be prohibited from relying on the “investment-only” exemption if they are a competitor of a target or a target’s parent, and/or if they engage in any of several enumerated activities, including contacting third parties regarding joining the board of a target company or communicating with a target company about proposed candidates for the target company’s board. The final judgment also will require Third Point to implement a compliance program. In light of the unintentional and brief nature of the violation, however, the FTC decided not to seek civil monetary penalties from Third Point.