Recent enforcement activity by the Antitrust Division of the Department of Justice and the Federal Trade Commission (FTC) imposing a civil fine on a company executive for alleged violations of the premerger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), serves as an opportunity to remind company officers, directors, and general counsel of the many HSR traps for the unwary. An HSR violation can result in fines of $16,000 per day for each day of the violation. The fines can be substantial (i.e., hundreds of thousands of dollars) because they begin to accrue from the date of closing until the violator makes a corrective filing and obtains HSR Act approval.
Unlike so-called “merger control” laws in most countries, the United States’ HSR Act applies to individuals making minority acquisitions. Indeed, with respect to officers and directors of a corporation, a pre-closing HSR filing may be required prior to holding in excess of $66 million (as adjusted annually) of the voting securities of the issuer. And HSR Act approval may be required prior to the exercise of options into voting securities or deposits of voting securities into a 401(k) or other retirement account.
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