At the request of the Federal Trade Commission (FTC), the U.S. Department of Justice (DOJ) last week filed civil charges against MacAndrews & Forbes Holdings Inc. (MacAndrews) for failing to comply with the Hart-Scott-Rodino Act (HSR) antitrust reporting requirements regarding the acquisition of voting securities. The DOJ action against MacAndrews is only the latest example of the antitrust agencies obtaining civil penalties from an investor who has a track record of failing (albeit unwittingly) to make necessary HSR filings for the purchase of additional shares to grow their minority interest in existing holdings. This action and the sizable civil penalties reinforce the point that investors need to exercise care and diligence when purchasing additional shares to ensure they satisfy regulatory requirements.
An HSR filing to acquire a non-controlling interest in a company generally provides some flexibility to acquire additional voting shares, but the HSR rules substantially constrain that flexibility by (a) requiring an additional HSR filing if the subsequent acquisition would cross one of a series of incremental HSR reporting thresholds relating to the value and percentage holdings in the target company, and (b) imposing a five year limit on the effectiveness of the original HSR approval. In this instance, each of those limitations was an issue for MacAndrews.
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