Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Third Point hedge funds agree to settle FTC charges of violating premerger notification requirements, (Aug 24, 2015)

By Michael Menzhuber, J.D., LL.M.

Three affiliated hedge fund companies and their management company, Third Point LLC, have agreed to settle charges by the FTC that they violated premerger reporting laws in connection with their 2011 acquisitions of stock in Yahoo! Inc., the Commission announced today (U.S. v. Third Point Offshore Fund, Ltd., File No.121-0019).

Under the terms of the stipulation, the defendants would be prohibited from relying on the investment-only exemption if they have: (1) contacted third parties to gauge their interest in joining the board of the target company; (2) communicated with the target company about proposed candidates for its board; or (3) engaged in other specified conduct in the four months prior to acquiring voting securities above the Hart-Scott-Rodino Act (HSR) Act threshold. Civil penalties were not assessed based on several factors, including that the violation was inadvertent and short-lived, and this was the defendants’ first violation of the HSR Act.

The HSR Act requires that: (1) companies and individuals notify the FTC and the Department of Justice of most large transactions that affect commerce in the United States; and (2) those acquirers must then observe a waiting period before closing their transaction, while one of the two agencies determines whether the transaction may result in a substantial lessening of competition. Acquisitions of up to ten percent of voting securities are exempted if they are made solely for investment purposes.

The FTC complaint alleges that Third Point Partners Qualified L.P., Third Point Ultra, Ltd., and Third Point Offshore Fund, Ltd. failed to observe the filing and waiting requirements of the HSR Act before purchasing shares in Yahoo. According to the complaint, the three defendant funds claimed that they were exempt from reporting to the U.S. antitrust authorities because the purchases were made solely for investment purposes. However, at the time of the stock purchases, Third Point LLC, which made investment decisions on behalf of the funds, was taking actions inconsistent with an investment-only intent, such as communicating with third parties to determine their interest in becoming the CEO or a board candidate of Yahoo.

The proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to: Daniel P. Ducore, Special Attorney, United States, c/o Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

The Commission vote to refer the complaint and proposed settlement to the U.S. Department of Justice for filing in federal court was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright dissenting. The Commission issued a statement, and Commissioners Ohlhausen and Wright issued a dissenting statement.

News: AcquisitionsMergers Antitrust FederalTradeCommissionNews