U.S. Merger Notification: Gates, Manulife Face Big Civil Penalties for Hart-Scott-Rodino Violations
The U.S. Department of Justice has twice levied significant civil penalties for failure to notify transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the Hart-Scott-Rodino Act) in recent weeks.
William H. Gates III was ordered to pay US$800,000 as a result of his acquiring, through a limited liability company, 500,000 shares of Republic Services Inc. The acquisition resulted in Mr. Gates owning approximately 10.1% of the company's outstanding voting securities. Mr. Gates' failure to notify the transaction was the result of an improper, albeit inadvertent, reliance on an investment exemption.
Like Mr. Gates, Manulife Financial, a Canadian corporation, improperly relied on an investment exemption with costly consequences. Manulife was ordered to pay US$1,000,000 in relation to a failure to notify an acquisition of stock issued by John Hancock Financial Services, Inc. The Hart-Scott-Rodino Act exempts acquisitions of 10% or less of a company's stock if they are made "solely for the purpose of investment"; however, the government alleged that this exception was not available to Manulife since, by the spring of 2003, it was considering a merger with John Hancock
