On April 4, 2016, the U.S. Department of Justice filed a civil antitrust lawsuit against activist investor ValueAct Capital. The DOJ asserts that ValueAct improperly relied on the “investment only” exemption to the Hart-ScottRodino Act reporting requirements when it bought over $2.5 billion worth of stock in Halliburton and Baker Hughes with the intention of influencing the business activities and strategies of the companies. ValueAct has indicated that it may fight the DOJ lawsuit, but this action nonetheless underscores that investors should exercise care when relying on the investment-only HSR exemption, because the antitrust enforcement agencies show no sign of relaxing their narrow interpretation of the exemption and strict enforcement program against perceived violations.

HSR Investment-Only Exemption -

The HSR Act imposes notification requirements and a statutory waiting period for transactions meeting certain size thresholds so that the antitrust enforcement agencies can undertake premerger review of such transactions. The HSR Act has a narrow exemption for acquisitions of less than 10 percent of a company’s outstanding voting securities if that acquisition is made “solely for the purposes of investment.”

Originally published on April 7, 2016.