A recent complaint and consent order brought by the US Department of Justice’s (DOJ) Antitrust Division and the US Federal Trade Commission (FTC) underscores that investors must keep track of filing obligations, as even inadvertent failures to file Hart-Scott-Rodino notices can result in substantial fines if the failures are repeated.
In this case, MacAndrews & Forbes Holdings Inc. will pay a fine of $720,000—equivalent to the maximum fine of $16,000 for each day the company was out of compliance—for violating pre-merger notification requirements because it failed to file under the Hart-Scott-Rodino Act and observe the required waiting period prior to its June 2012 acquisitions of voting securities of Scientific Games Corporation (SG).
In a complaint filed in the US District Court in Washington, DC, the government alleged that MacAndrews first acquired voting securities of SG in February 2007. At the time, MacAndrews filed the requisite HSR notification. HSR filing rules allowed MacAndrews to acquire additional voting securities of SG up to the next reporting threshold without making additional HSR filings for up to five years. MacAndrews’ June 2012 acquisitions were outside of this five-year period, and, thus, MacAndrews was required, but failed, to file an HSR notification and observe the required waiting period.
In August 2012, MacAndrews filed a corrective filing, explaining that its failure to file a timely HSR notification and observe the waiting period was inadvertent. The government’s complaint does not allege that there were any substantive competition law issues involved in the transaction.
According to the complaint, MacAndrews also failed to file an HSR and observe a waiting period relating to its acquisition of voting securities in SIGA Technologies in 2011. MacAndrews made a corrective filing and stated that its failure to file was inadvertent. The government’s complaint does not allege that MacAndrews was investigated in relation to the SIGA filing.
In general, the FTC and DOJ have not brought enforcement actions for a first failure to file where it appears that failure was inadvertent, but a second failure often causes the agencies to seek relief.
While acquisitions of voting securities for investment purposes generally involve no substantive issue, it is important for investors to monitor the timing of filings and share values to ensure that a new, routine acquisition of securities will not occur outside the exemption period or above a threshold that triggers a filing requirement.