At the one year anniversary of the Trump administration, antitrust merger enforcement remains similar to the Obama administration, but it is still early to judge given the delays in antitrust appointments and given the DOJ’s lawsuit against the vertical AT&T/Time Warner transaction, the first vertical merger litigation in decades. Below are some of the recent developments that have impacted merger enforcement by the Federal Trade Commission (FTC) and Antitrust Division of the US Department of Justice (DOJ), as well as European regulators.
The Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ) announced several antitrust enforcement actions in advance of the inauguration of President Trump, including settlements for failures to file under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), a challenge to an unreportable deal and a settlement of a “gun-jumping” claim under the HSR Act. These cases illustrate the importance of compliance with the often complex reporting, waiting period and substantive aspects of antitrust laws in connection with acquisitions of various types, whether or not those acquisitions require premerger reporting. Failure to comply can result in significant financial penalties.
Two HSR “Failure to File” Settlements. On January 17, 2017, the FTC announced two settlements for failures to submit HSR filings and observe the statutory waiting period under the HSR Act prior to consummating acquisitions that met the relevant thresholds. The HSR Act requires notification of certain acquisitions of voting securities, assets and non-corporate interests if the value held as result of the transaction is in excess of certain notification thresholds and size of person thresholds (if applicable), and the transaction is not otherwise exempt. Parties to reportable transactions must observe the statutory waiting period prior to closing. If they fail to file, or otherwise do not observe the waiting period under the HSR Act, the parties may be liable for civil penalties of up to $40,654 per day (which was recently increased from $40,000, effective February 24, 2017).
In the first settlement, Ahmet Okumus agreed to pay $180,000 in connection with failing to notify for his purchases of voting securities of Web.com Group, Inc. (Web.com). According to the complaint, in September 2014, Okumus acquired voting securities of Web.com and as a result, held approximately 13.5 percent of the voting securities of Web.com. Okumus continued to acquire voting securities of Web.com through November 2014. Okumus did not file an HSR notification prior to making these acquisitions, relying on the “investment only” exemption, which exempts acquisitions resulting in holdings of 10 percent or less of the issued and outstanding voting securities if the shares are held solely for the purpose of investment (see 15 U.S.C. § 18a(c)(9) and 16 C.F.R. § 802.9). However, because Okumus held in excess of 10 percent, this exemption was not applicable. In late November of 2014, Okumus made a corrective filing that allowed him to acquire additional Web.com voting securities for approximately five years, provided that the value of the voting securities he held as a result of any acquisition did not exceed the $100 million (as adjusted) notification threshold. In a letter that accompanied his corrective filing, he indicated that the failure to file was inadvertent. The FTC did not seek civil penalties in that instance.
In June of 2016, Okumus began acquiring additional voting securities of Web.com. Later that month he acquired 236,589 voting securities of Web.com, and as a result of that acquisition, Okumus held voting securities valued (per the HSR rules) in excess of the $100 million (as [...]