July 14, 2020

Volume X, Number 196

July 14, 2020

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July 13, 2020

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Does Your Antitrust Compliance Policy Cover All It Should Under HSR?

Businesses and individuals should be aware that their antitrust compliance policies may not adequately cover all reportable transactions under the Hart-Scott-Rodino (HSR) Act. The Federal Trade Commission (FTC) states that an HSR compliance program tracking only acquisitions that require a payment could lead to "liability and fines for failure to file."

Although some exemptions may apply, transactions meeting the (i) commerce, (ii) size of transaction, and (iii) size of person tests must typically be reported to the FTC and Department of Justice, and cannot be closed before the end of the statutory waiting period unless terminated early.

The FTC identifies five types of transactions that may require HSR reporting but may not be covered by antitrust compliance policies:

  • Exchange of one type of interest for another. If the newly received interest is voting securities, for example, it may trigger HSR reporting obligations. The FTC gives an example of a large multination holding company paying civil penalties for failure to fulfill its HSR obligations following the exchange of convertible notes in a company for voting securities of the same company.

  • Backside acquisition. When a corporation acquires another corporation, shareholders of the target may receive voting securities of the purchaser. The receipt of these securities may trigger an HSR reporting obligation.

  • Consolidation of two companies. If the consolidation results in a new company, which is its own ultimate parent entity, the shareholders of the two old companies may receive shares in the new, consolidated company in exchange for their old shares. This acquisition of voting securities may trigger HSR reporting obligations.

  • Reorganization. If a non-corporate entity, such as a partnership, transforms into a corporation, the receiving of stock by the former partners, in exchange for their partnership interests, may be an HSR-reportable transaction.

  • Employee compensation. If an employee receives compensation in the form of voting securities of the employee's company, the receiving of those securities may be an HSR-reportable transaction.

It is important for businesses and individuals to ensure that adequate antitrust compliance policies are in place to catch these types of transactions and fulfill the requisite reporting obligations of the HSR Act.

Copyright © by Ballard Spahr LLPNational Law Review, Volume VIII, Number 144


About this Author

Leslie John, Ballard Spahr Law Firm, Philadelphia, Antitrust Litigation Attorney

Leslie E. John is the Practice Leader of Ballard Spahr's Antitrust Group. Leslie concentrates on antitrust and complex litigation, and she has represented clients—many of them in the pharmaceutical and health care industries—in federal and state courts and before the U.S. Department of Justice and Federal Trade Commission. She also advises on antitrust issues in mergers and acquisitions, including securing pre-merger clearance under the Hart-Scott-Rodino Act, and counsels clients on antitrust compliance and risk management.

Leslie is recognized...

James Lockhart, Ballard Spahr Law Firm, Minneapolis, Antitrust, Construction and Real Estate Litigation Attorney

Jim Lockhart represents businesses in complex litigation involving commercial disputes, real estate and construction, and antitrust cases. His trial practice experience in state and federal courts, as well as before administrative agencies and arbitration panels, includes price fixing, market allocation, and other antitrust matters, complex breach of contract claims, professional liability, fraud, and defalcation claims, shareholder disputes, insurance law, creditors' rights, real estate, zoning and land use, construction litigation, and other business and commercial disputes.

Jim uses his broad experience to efficiently resolve disputes both large and small and to counsel clients about measures to prevent litigation. He has also served on the Management Committee at Lindquist since 2012.

Representative Matters

  • Represented national freight forwarder in federal court litigation involving alleged kickback scheme by an independent contractor

  • Represented owner of historic, 1,300 unit apartment complex in Minneapolis, Minnesota obtaining dismissal of lawsuit seeking to eliminate numerous easements providing virtually all of the access and utility services to the complex. In re Crablex, Inc., 762 N.W.2d 247 (Minn. Ct. App. 2009) rev. denied

  • Represented national title insurer in successful action to enforce an escrow agreement providing that $2,400,000 in escrow funds could be used by title insurer to settle mechanic's lien claims against large Minneapolis condominium project

Fred G. DeRitis, Ballard Spahr, Philadelphia, Pennsylvania, litigation, litigation lawyer, FTC, privacy, data security

Fred G. DeRitis is a member of the firm’s Litigation Department. While interning at the Federal Trade Commission’s Bureau of Competition, Mr. DeRitis authored a number of reports for merger and antitrust investigations in the oil, gas, software, and retail industries.

Mr. DeRitis also held internships at the Mayor’s Office of Philadelphia in the Commerce Department and the Managing Director’s Office. His duties included conducting market analysis to enhance economic development in strategic commercial regions.