The FTC has announced penalties in two separate enforcement actions totaling almost $2 million for alleged violations of the HSR Act. The matters: U.S. v. Clarence L. Werner c/o Werner Enterprises, Inc.; and U.S. v. Biglari Holdings Inc. include claims of failures to file notification under the HSR Act and failures to observe the required waiting period prior to acquiring certain voting securities. 

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, commonly known as the HSR Act, requires parties to certain transactions to notify the Federal Trade Commission and Department of Justice, and to observe a waiting period prior to completing the transaction. The minimum threshold for reporting under the HSR Act is currently $92.0 million (adjusted annually). The HSR Act enables antitrust regulators to review transactions, investigate and address potential competitive concerns prior to completion, and carries annually adjusted monetary penalties for failure to comply – presently set at $43,792 per day. The requirement can sometimes become a trap for investors – not realizing that filing requirements under the HSR Act may apply in unexpected contexts, including acquisitions of minority holdings. It has been the unwritten policy of the agency for some time to exercise its prosecutorial discretion and not impose penalties for first time inadvertent failures to file, but to act more firmly in the case of repeat offenders, even where inadvertent.

Werner Enterprises, Inc. founder Clarence L. Werner agreed to a $486,900 civil penalty to settle claims that he violated the HSR Act by acquiring Werner Enterprises stock in a series of open market purchases without filing under the HSR Act and observing the required waiting period. Notably, the agency alleged that several of the purchases were made after Mr. Werner became aware that prior purchases violated the Act.

Separately, investment fund operator Biglari Holdings Inc. agreed to a $1.4 million civil penalty in settlement of claims that acquiring Cracker Barrel Old Country Store, Inc. violated the HSR Act. According to the agency, the acquisitions, together with the firm’s prior holdings in the company, triggered a reporting requirement as a result of exceeding a notification threshold beyond the 5 year period allowable under the firms’ earlier filing. Biglari had previously been required to pay $850,000 for HSR violations-related to purchases of Cracker Barrel in 2012.[1] According to the complaint in the matter, FTC’s Premerger Notification Office contacted the firm and asked why no filing had been made with respect to certain March 2020 share acquisitions, likely indicating continuous monitoring by the agency with respect to acquirers that have previously failed to file.

While the penalties imposed in the matters do not represent the maximum available in either case, they attest to the potential risk of failures to file under the HSR Act. The enforcement actions are a reminder not only that the HSR Act is strictly enforced, with dozens of enforcement actions under the agency’s belt, but that the application of the HSR rules is not always intuitive or clear-cut.

Consider HSR filing obligations in all types of transactions, including smaller transactions, minority investments, follow-on investments, joint ventures, asset acquisitions and exercises of warrants or options. HSR enforcement extends, for instance, to company executives acquiring stock in their employers. Under the rules, when a company employee or director acquires company stock that results in an aggregate holding that is valued above the HSR reporting threshold, filing obligations can arise – as in the Werner case. The most common form of “corrective filing” relates to this very scenario. Also consider the current value of previously acquired minority positions to plan accordingly for potential HSR filing and waiting period requirements when participating in follow-on offerings and investments. Review minority holdings that may have appreciated above the HSR threshold and plan for future incremental purchases that may trip the initial or subsequent notification thresholds.

Any transactions where shares or other securities are being acquired should be reviewed by antitrust counsel to evaluate potential reporting obligations and ensure strict compliance with the HSR Act.

[1] Family Dining Meets Value Investing – Proxy Battle Spills Over into Antitrust Arena and Lands Investor $850,000 Penalty

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Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels…

Chris Ondeck is co-chair of the Firm’s Antitrust Group and co-head of the Washington DC office. He represents clients in complex antitrust and consumer protection litigation, defends mergers and acquisitions before the U.S. antitrust agencies, represents companies involved in government investigations, and counsels on antitrust compliance. Chris is also the founder and leader of the firm’s Price Gouging Practice, and is one of the key thought leaders in this space.

Chris handles antitrust matters for clients in a number of industries, including food and agriculture, financial services, media, telecom, technology, e-commerce, consumer products, natural resources, oil and gas, chemicals, and pharmaceuticals.  He also serves as outside counsel to a large number of industry groups, including trade associations and cooperatives.

Chris has been recognized as a leading antitrust practitioner by Chambers, noting that clients describe him as “our primary thought partner – he’s very good at explaining the complex issues and making them easy to understand” and praising “his strong advocacy skills”; by The National Law Review as a “Go To Thought Leader 2020”; by Acritas as a “Star” in multiple years; by Benchmark Litigation as a National Litigation Star 2021; and by The Legal 500 United States for Antitrust: Civil Litigation/Class Actions.

Photo of Colin Kass Colin Kass

Colin Kass is a partner in the Litigation Department and co-chair of the Antitrust Group, and a member of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team. An experienced antitrust and commercial litigation lawyer, Colin has litigated cases before federal and state courts throughout…

Colin Kass is a partner in the Litigation Department and co-chair of the Antitrust Group, and a member of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team. An experienced antitrust and commercial litigation lawyer, Colin has litigated cases before federal and state courts throughout the United States and before administrative agencies. His practice involves a wide range of industries and spans the full-range of antitrust and unfair competition-related litigation, including class actions, competitor suits, dealer/distributor termination suits, price discrimination cases, criminal price-fixing investigations, and merger injunctions.

Colin also has extensive experience dealing with the Federal Trade Commission and Department of Justice in obtaining clearance for competitively-sensitive transactions and handling anticompetitive practices investigations. His practice also includes counseling clients on their sales, distribution, and marketing practices, strategic ventures, and general antitrust compliance.

Photo of John R. Ingrassia John R. Ingrassia

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating…

John is a partner at the Firm, advising on the full range of foreign investment and antitrust matters across industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services consumer goods and health care. He is the first call clients make in matters relating to competition and antitrust, CFIUS or foreign investment issues.

For more than 25 years, John has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions, joint ventures, or price gouging compliance.

John’s practice focuses on the analysis and resolution of CFIUS and antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger CFIUS and HSR notification requirements. He advises clients on issues related to CFIUS national security reviews, and on CFIUS submissions when non-U.S. buyers seek to acquire U.S. businesses that have national security sensitivities.  He also regularly advises clients on international antitrust issues arising in proposed acquisitions and joint ventures, including reportability under the EC Merger Regulation and numerous other foreign merger control regimes.

His knowledge, reputation and extensive experience with the legal, practical, and technical requirements of merger clearance make him a recognized authority on Hart-Scott-Rodino antitrust merger review. John is regularly invited to participate in Federal Trade Commission and bar association meetings and takes on the issues of the day.