Client Alerts

Massive increase in HSR monetary penalties underlines the tremendous importance of proper compliance

Client Alerts | July 7, 2016 | Securities and Corporate Finance | Investor Activism

On Wednesday, June 29, 2016, the U.S. Federal Trade Commission (the “FTC”) announced that it approved final amendments to Commission Rule 1.98 to increase the maximum civil penalty dollar amounts for various legal violations as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Among such violations, as of August 1, 2016, the maximum civil penalty for a violation under the Hart-Scott-Rodino Antitrust Improvements Act, Section 7A of the Clayton Act (the “HSR Act”) will be increased from $16,000 to $40,000 per day. Annual adjustments to the maximum dollar amount of such penalties will now be made annually.

The HSR Act imposes notification and waiting period requirements for qualifying open market purchases and negotiated transactions so that they can undergo premerger antitrust review by the U.S. Department of Justice (the “DOJ”) and the FTC. Federal courts can assess civil penalties for premerger notification violations under the HSR Act in lawsuits brought by the DOJ.

This massive $24,000 per day increase in civil penalties underlines the tremendous importance of proper HSR compliance in building a position, especially for investors with an activist track record. Liaising with experienced HSR counsel from the start of building a position has never been more important.