It is extremely rare to see the Federal Trade Commission (“FTC”) pursue an enforcement action under the Hart-Scott-Rodino Act (“HSR Act”) for illegal pre-merger coordination, better known as “gun jumping.” Nonetheless, the FTC recently announced that certain crude oil producers will pay a record $5.6 million civil fine to settle allegations that they engaged in impermissible pre-merger conduct in violation of the HSR Act.
In general terms, the HSR Act requires merging parties to certain transactions to submit an HSR notification form to the federal antitrust agencies and observe a waiting period before completing the proposed deal. In this case, the FTC alleged that buyers assumed some operation and decision-making control over significant aspects of seller’s day-to-day business operations prior to expiration of the waiting period and the FTC’s review of the transaction. In addition to the record-breaking financial settlement, it is also noteworthy that all parties to the transaction are on the hook for the financial amount because historically gun-jumping penalties have been assessed entirely on the buyer’s side. New, more robust HSR rules go into effect on February 10, so parties considering reportable transactions should be especially vigilant to comply with the HSR Act.