Antitrust Law Daily Wrap Up, ANTITRUST—D.D.C.: Barry Diller explains decision to settle HSR allegations, as court approves consent decree, (Jul 3, 2013)

By Jeffrey May, J.D.

The federal district court in Washington, D.C. today approved a final judgment resolving a federal government suit against Barry Diller for violating the premerger notification requirements of the Hart-Scott-Rodino (HSR) Act with respect to his acquisition of hundreds of thousands of shares of The Coca Cola Company between 2010 and 2012. The settlement of the suit, which was filed yesterday, requires Diller to pay a $480,000 civil penalty (U.S. v. Diller, Case No. 1:13-cv-01002, FTC File No. 121 0179).

Saying that he cares about “good citizenship and good government,” Barry Diller issued a statement today explaining his decision to settle the suit. Diller, who is on Coke’s board of directors, also called on the federal antitrust agencies “to make explicit that officers and directors that choose to align their interests more closely with the shareholders they serve should be subject to higher HSR thresholds.”

Diller offered the explanation, because he felt that the FTC press release did not provide all of the relevant facts.

“I chose to settle this matter rather than pursue the time and expense of a court challenge because the FTC agreed to accept a small fraction of the fines that their theory, if accurate, would have entitled them to,” said Diller. “In fact, I am told that the amount I agreed to pay is one of the smallest percentages the FTC has settled for with respect to purported violations of the HSR Act. I had assumed that the FTC would explain why it agreed to such a small settlement, but since they did not, I feel it is important that the relevant facts are noted.”

Diller said that he was unaware at the time of the Coca-Cola purchases that the filings were necessary but promptly filed when he became aware of the requirements. The government noted in its complaint that Diller had previously made a corrective filing in connection with the acquisition of voting securities of CitySearch Inc. in 1998 and that, at that time, the government declined to seek penalties.

“[T]he only infraction was in the timing,” said Diller. “I gained no advantage of any kind and there was no harm to Coca-Cola shareholders, nor to anyone else. While I am surely not suffering, one can fairly question the tactics used by the FTC in penalizing individuals for de minimis open market share purchases and inadvertent paper shuffling.”

He went on to question the application of the HSR Act in this context, noting his understanding that “the HSR Act is designed to help our government prevent anti-competitive deals.”

“It is inconceivable that my less than [1]% investment in Coca-Cola shares, made as a director of Coca-Cola, could harm competition,” Diller contended. “Ironically, corporate governance gurus encourage such purchases, while the FTC seeks to deter them through filing fees, delays and fines. I do not know the rationale for the government to penalize such purchases with hundreds of thousands of dollars in HSR filing fees.”

The case is 1:13-CV-01002.

Attorneys: Joseph D. Larson (Wachtell, Lipton, Rosen & Katz) for Barry Diller. Kenneth Libby, Department of Justice Antitrust Division.

Companies: Coca Cola Co.

Cases: Antitrust AntitrustDivisionNews FederalTradeCommissionNews