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.

Ballard Spahr's Antitrust Group regularly counsels clients on reporting requirements under the HSR Act and other antitrust issues. If you have an antitrust compliance policy in place, and seek a review, or are considering a transaction that could raise issues, please contact any member of the Antitrust Group.


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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.





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