Department Of Justice Settles Hart-Scott Rodino Gun Jumping Case Against Smithfield Foods And Premium Standard Farms

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Smithfield Foods, Inc. (Smithfield), the largest pork packer and processor in the United States, and Premium Standard Farms, LLC (Premium), the sixth-largest pork packer and processor, agreed to pay a $900,000 civil penalty to settle a “gun-jumping” suit filed by the Department of Justice (DOJ). The suit alleged that the parties violated the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) in connection with Smithfield’s 2007 acquisition of Premium. DOJ alleged that Smithfield acquired “beneficial ownership” of Premium prior to expiration of the HSR waiting period by taking control of Premium’s hog purchasing contracts. Although DOJ did not challenge the terms of the merger agreement governing Premium’s interim operations, it alleged that Premium’s practice of submitting its hog purchasing contracts for Smithfield’s approval amounted to an abdication of its independent business judgment in respect of a key element of its business.1 What sets this case apart from previous gun-jumping challenges is the lack of specificity as to what conduct triggered the transfer of beneficial ownership. As drafted, the allegations in the complaint could cover conduct that has never been the basis for a gun-jumping challenge.

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Published In: Antitrust & Trade Regulation Updates, Mergers & Acquisitions Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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