On November 7, 2014, the Department of Justice Antitrust Division (“DOJ”) announced it had settled an enforcement action for improper premerger coordination (commonly referred to as “gun-jumping”) with Flakeboard America Limited (“Flakeboard”) and SierraPine regarding Flakeboard’s proposed acquisition of three SierraPine mills. Among other things, the proposed settlement requires the parties to pay $3.8 million in civil penalties for violating the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), $1.15 million disgorgement in illegally obtained profits for violation of the Sherman Act—an exceedingly rare remedy for gun-jumping violations—and to establish antitrust compliance programs. The proposed settlement must be approved by a federal court under the Tunney Act.

Legal Background -

Under the HSR Act, parties may not consummate their transaction, or transfer control from the seller to the buyer (either directly or indirectly), until the HSR waiting period expires. A transfer of beneficial control occurs where, for example, the buyer makes business decisions for the seller, whether under the express interim operating covenants contained in the acquisition agreement or through consensual cooperation between the parties. Gun-jumping arises when there has been a transfer of such control prior to the expiration of the HSR waiting period. The penalty for violating the HSR Act is up to $16,000 for each day of the violation, and it can be applied to both the buyer and the seller.