At the request of the FTC, the DOJ filed a complaint in the US District Court in Washington DC, against two investment funds, ESL Partners, L.P. and ZAM Holdings, L.P., for violating the premerger notification requirements of the Hart-Scott-Rodino (HSR) Act. The HSR Act requires parties to mergers or acquisitions that exceed certain jurisdictional thresholds to notify the FTC and the DOJ of the proposed transaction. The parties must then observe a waiting period, often 30 days, before closing the merger or acquisition.
ESL Partners and ZAM Holdings failed to notify the FTC and DOJ of their acquisitions of AutoZone, Inc. voting shares in the fall of 2004. Both companies individually increased their holdings in AutoZone to more than US$50 million. Prior to these purchases, ESL Partners held US$775 million of AutoZone voting securities, and ZAM Holdings, through its subsidiary ESL Investors, held US$225 million.
On four occasions between September 28, 2008 and October 14, 2008, ESL Partners purchased AutoZone stock, thereby increasing its total holdings to more than 10 percent of the auto-part retailer’s outstanding voting stock. ESL Partners was required under the HSR Act to file a notification and observe the HSR waiting period prior to completing any acquisition of AutoZone shares. Nonetheless, ESL Partners did not make the required notification until after the FTC inquired into the absence of such a filing on January 27, 2005.
Similarly, ZAM Holdings failed to notify the FTC and DOJ when its subsidiary ESL Investors made two separate purchases of AutoZone voting stock in October 2004. ZAM did not file an HSR notification to cover these purchases until after the FTC notified the company on January 31, 2005.
Although both investment funds eventually filed notifications and did not have prior HSR violations, the FTC convinced the DOJ to file a civil lawsuit against ESL Partners and ZAM Holdings. To settle these charges, ESL Partners agreed to pay a US$525,000 penalty and ZAM Holdings a $275,000 penalty. The FTC noted that it takes the premerger notification process seriously and that it will continue to seek action against those failing to satisfy their responsibilities under the Act.