DIRECTORS AND EMPLOYEES WHO ACQUIRE COMPANY STOCK

MAY BE SUBJECT TO HSR ACT

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), requires parties to certain transactions to notify the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ), pay a filing fee, and await the expiration or termination of a statutory waiting period before consummating
the transaction.

While the primary purpose of the HSR Act is to give the FTC and DOJ an advance opportunity to analyze a proposed transaction’s effects on competition, transactions that have little or no effect on competition nonetheless may be reportable. In particular, acquisitions of a company’s stock by the company’s directors or employees may be reportable if the applicable thresholds are satisfied. An exemption for certain acquisitions made “for investment purposes only” is unavailable to company directors and presumptively unavailable to company officers.

Failure to comply with the HSR Act can lead to significant sanctions, including civil penalties of up to $11,000 per day of noncompliance. No such penalties are likely, however, for parties to a reportable acquisition of company stock by a director or employee if the filing is missed inadvertently and the parties come forward voluntarily to report the error, make the necessary retroactive filings, and undertake corrective measures to prevent future recurrences.

For this reason, in addition to complying with the HSR Act with respect to future acquisitions of company stock by employees and directors, parties who become aware of inadvertent past violations with respect to such transactions are well advised to approach the agencies affirmatively and promptly to correct the problem.

To help our clients and friends navigate these issues, we have prepared a summary of the HSR reportability tests. Please read it here.

With decades of experience, DLA Piper’s Antitrust and Trade Regulation group helps clients to achieve their business goals without jeopardizing compliance with federal, state, and international antitrust and competition laws.

For more information, please contact:

Paolo Morante

Kenneth G. Starling

Published by DLA Piper US LLP
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