USA Law and Practice Contributed by: Bradley Justus, Lisl Dunlop, Josh Jowdy and Sandhya Taneja, Axinn, Veltrop & Harkrider LLP
actions in state courts. Private parties, including customers and competitors, may also challenge mergers in federal courts. Private enforcement actions, however, are relatively rare.
corporate interests that meet certain jurisdiction - al thresholds. See 2.5 Jurisdictional Thresholds . Internal Restructuring To be HSR reportable, a transaction must result in a transfer of beneficial ownership of voting securities, assets or non-corporate interests from one ultimate parent entity to a different ulti - mate parent entity. See 2.4 Definition of “Con - trol” . Restructurings or reorganisations in which the ultimate parent entity does not change gen - erally do not require an HSR filing. Entity Formation HSR notification is required for the formation of certain types of joint ventures. The formation of corporate joint ventures is treated under the HSR Rules as acquisitions of voting securities of the venture by the venturers. The formation of non-corporate joint ventures requires HSR notification only when one of the parties will “control” the new venture. See 2.10 Joint Ventures . 2.4 Definition of “Control” “Control” is defined under the HSR Act as either: • holding 50% or more of the outstanding voting securities of an issuer or, for an unin - corporated entity, having the right to 50% or more of the entity’s profits or, upon dissolu - tion, its assets; or • having the present contractual power to designate 50% or more of the directors of a corporation or of the trustees of certain trusts. An entity or individual that is not controlled by any other entity is considered the Ultimate Par - ent Entity (UPE). The relevant “persons” for HSR Act purposes are the UPE of the acquiring party, together with all entities it controls directly or
2. Jurisdiction 2.1 Notification
If the transaction meets the jurisdictional thresh - olds of the HSR Act and does not qualify for an exemption, the parties must each submit a pre- merger notification form and observe the HSR waiting period. The parties must file their HSR Forms with both Agencies. 2.2 Failure to Notify Failure to comply with the requirements of the HSR Act may result in civil penalties of up to USD53,088 per day. The FTC adjusts the maxi - mum HSR civil penalty annually for inflation. In settlements of FTC claims, parties are rarely penalised with the maximum amount. Historically, the FTC has had an informal “one free pass” practice and generally has not sought civil penalties for a party’s first inadvertent viola - tion if that party self-reports the violation, makes a corrective filing, and provides a detailed expla - nation of the circumstances that contributed to their failure to file. The FTC routinely seeks pen - alties of hundreds of thousands or millions of dollars in cases where the FTC suspects bad faith or a party is a repeat offender.
2.3 Types of Transactions HSR-Reportable Transactions
The HSR Act requires that parties to certain mergers or acquisitions notify the Agencies prior to closing the proposed transaction. HSR filing requirements apply to transactions involving the acquisition of voting securities, assets, or non-
711 CHAMBERS.COM
Powered by FlippingBook