Antitrust Law Daily Wrap Up, TOP STORY—Berkshire Hathaway to pay civil penalty of $896,000 over late HSR filing, (Aug 20, 2014)

By Jeffrey May, J.D.

Berkshire Hathaway Inc. has agreed to pay a civil penalty of $896,000 to settle charges that it failed to timely notify the government once its holdings in USG Corporation exceeded the premerger reporting threshold under the Hart-Scott-Rodino (HSR) Act late last year. Today, a complaint against the investment holding company and a proposed consent decree were filed in the federal district court in Washington, D.C. If approved by the court, the consent decree will settle the charges (U.S. v. Berkshire Hathaway, Inc., Case 1:14-cv-01420).

Since at least 2006, Berkshire Hathaway has held voting securities of building materials maker USG. In 2008, Berkshire Hathaway purchased convertible notes that could be converted into USG voting securities. On December 9, 2013, Berkshire Hathaway changed the convertible notes it owned in USG into 21.4 million voting securities. As a result of the conversion, the value of its USG holdings exceeded $283.6 million, the premerger reporting threshold under the HSR Act at the time, the government alleged. Berkshire Hathaway did not, however, submit an HSR filing and observe the waiting period before closing the transaction, according to the complaint. Berkshire Hathaway eventually made a corrective filing; however, the company was allegedly in violation of the HSR Act for nearly two months from December 9, 2013, until February 3, 2014, when the waiting period expired.

Berkshire Hathaway's tardy filing might not have resulted in an enforcement action had it not been for another corrective filing by the company just six months earlier. In June 2013, the company did not file under the HSR Act before acquiring $41 million of voting securities in Symetra Financial Corporation, even though the Berkshire Hathaway held Symetra voting securities valued at approximately $310 million. At that time, Berkshire Hathaway made the corrective filing, noted that the failure to file and observe the waiting period was inadvertent, and pledged to implement appropriate HSR monitoring procedures going forward. According to the complaint, the FTC Premerger Notification Office decided not to recommend a civil penalty action for the infraction, but advised the company that it was “accountable for instituting an effective program to ensure full compliance with the Act's requirements.”

The case against Berkshire Hathaway and the relatively hefty civil penalty should serve as a warning to timely file premerger notification documents and to avoid multiple violations. Recent actions against Barry Diller and MacAndrews & Forbes Holdings Inc., a New York-based holding company wholly-owned by Ronald O. Perelman, for alleged violations of HSR premerger notification requirements in 2013 also alleged instances of earlier corrective filings.

The maximum daily civil penalty for a violation is $16,000. Under the terms of the proposed final judgment, Berkshire Hathaway would be required to pay $896,000 in civil penalties to settle the charges.

FTC Bureau of Competition Director’s statement. “The Commission requires compliance with the premerger notification rules, and will not hesitate to seek civil penalties against companies or individuals that fall short of their filing responsibilities,” said FTC’s Bureau of Competition Director Deborah Feinstein in an August 20 statement. “Although we may not seek penalties for every inadvertent error, we will enforce the rules when the same party makes additional mistakes after promises of improved oversight. Companies and individual investors alike should ensure that they have an effective program in place to monitor compliance with HSR filing requirements.”

Attorneys: Daniel P. Ducore, FTC, for United States. Mary Ann Todd (Munger, Tolles & Olson LLP) for Berkshire Hathaway Inc.

Companies: Berkshire Hathaway Inc.; Symetra Financial Corp.; USG Corp.

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