On June 20, 2013, the Antitrust Division of the U.S. Department of Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC" and, together with the Antitrust Division, the "Agencies") announced that MacAndrews & Forbes Holdings Inc. ("M&F") agreed to a $720,000 settlement for violating the premerger reporting and waiting period requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act").
On February 1, 2007, M&F filed an HSR Act notification to report its acquisition of voting shares of Scientific Games ("SG") and, following the statutory waiting period, was permitted to acquire such shares for five years - until February 2012 - without making a new HSR Act filing. In February of 2012, M&F was obligated to file a new HSR Act notification and observe a new waiting period before acquiring additional voting shares if, as a result of such acquisition, M&F would hold in excess of the lowest applicable HSR threshold ($50 million, as adjusted), or if no other exemption applied. M&F failed to make a timely new HSR Act filing prior to acquiring a dollar amount of additional shares in June 2012 which, together with the previously acquired shares, breached the HSR Act threshold.
The value of publicly traded stock, such as SG's, is determined by looking at the lowest closing quotation price in the preceding 45 calendar days. If a stock goes up in value over time, even acquisitions of small tranches of shares can put an acquiring person above a notification threshold. M&F had filed an HSR Act notification in February 2007, and the five year period in which it could make additional acquisitions expired when it acquired an additional 800,000 shares, valued at $6.5 million, in June 2012. This acquisition, when aggregated with the value of SG voting shares already held by M&F, exceeded the filing threshold.
Typically the Agencies do not penalize parties who inadvertently fail to file, as long as they immediately report their failure upon discovery and file a corrective filing; however penalties may be levied if the company is not a first time offender. Although M&F made a corrective filing, it was not a first time offender. This settlement should serve as a warning to filers that the Agencies' are policing transactions subject to the HSR Act and will levy sizeable fines and substantial penalties for HSR Act violations.