The US antitrust agencies have issued decisions and guidelines in the past month that are important for companies completing transactions that require US merger control filings pursuant to theHart-Scott-Rodino Act (HSR). Most transactions involving assets, sales or shares in or into the US valued at more than $70.9 million are subject to HSR, which in most cases requires the parties to observe a 30-day waiting period before a transaction can be consummated.
”Pull and Refile” Rule Allows for Second Waiting Period
On June 28, 2013, the US Federal Trade Commission (FTC) codified its long-standing practice allowing filing companies that withdraw and then promptly refile HSR filings to obtain a second 30-day waiting period without having to pay an additional filing fee. If an HSR filer withdraws its notification and then refiles the same notification within two (2) business days, the waiting period restarts. This “pull and refile” strategy is employed if it appears the agency has limited concerns about the transaction and that those concerns can be resolved within an additional 30-day window; it also avoids a costly and time-consuming “Second Request,” which the agencies will issue if the competition concerns have not been resolved at the end of the initial waiting period. Allowing parties to voluntarily pull their HSR filings also saves government resources involved with drafting and pursuing a Second Request that might not be necessary if additional time is allowed. In addition, the revised rules harmonize Securities and Exchange Commission (SEC) and FTC treatment of terminated transactions: HSRs for transactions in which there is an SEC notification of the termination are deemed to have been withdrawn as of the date of the SEC notification, although parties are required to notify the agencies by letter when the SEC filing is made.
Continued enforcement of HSR filing violations
The agencies also signaled again that they will pursue companies or individuals that fail to comply with their obligations to file, even if there is no substantive competition issue, and particularly when the failures have been repeated. On June 25, 2013, we wrote about a complaint and fine of $720,000—equivalent to the maximum fine of $16,000 for each day the company was out of compliance—against MacAndrews & Forbes Holdings Inc. for violating pre-merger notification requirements because it failed to submit an HSR filing and observe the required waiting period prior to its June 2012 acquisitions of voting securities of Scientific Games Corporation.1 This violation followed a failure to file and a corrective filing by MacAndrews in 2011.
Since then, the Antitrust Division of the US Department of Justice (DOJ) brought another complaint and consent decree, this time against Barry Diller for violating HSR notice and waiting requirements. Diller agreed to pay a fine of $480,000 for failing to file an HSR and observe the waiting period relating to purchases of voting securities of The Coca Cola Company (Coke).
In its complaint, filed in the US District Court for the District of Columbia, the DOJ alleged that Diller first acquired voting securities of Coke in 2010 without filing a required HSR and observing the waiting period. Diller continued to make additional acquisitions of voting securities of Coke without filing HSRs or observing waiting periods until May 2012, when Coke in-house counsel asked Diller if an April 2012 acquisition of voting securities required an HSR filing. In May 2012, Diller submitted corrective filings for all of the Coke voting securities he had acquired. The DOJ alleged that Diller was in continuous violation of HSR filing requirements from his first acquisition in 2010 until June 2012, when the waiting period on Diller’s May HSR expired.
As with MacAndrews, Diller had a prior HSR violation for failure to notify and observe the waiting period. Diller had failed to submit a filing in 1998, an error which he subsequently corrected. At that time, Diller received a warning from the FTC that he was responsible for instituting a program to ensure full compliance with HSR requirements.
While most HSR filings proceed smoothly through the review process and do not raise substantive competition concerns, the actions of the agencies over the past month reinforce both the importance of ensuring that a filing is made where required and that strategic options are available when the transaction being reported raises substantive issues.