On August 5, 2024, the United States Department of Justice filed a rare gun jumping civil lawsuit and proposed settlement in the United States District Court for the Southern District of New York against a global sports and entertainment venue services company (the “acquiror”) in connection with its acquisition of a venue services/management company (the “acquiree”). United States v. Legends Hosp. Parent Holdings, LLC, No. 1:24-cv-5927 (S.D.N.Y. Aug. 5, 2024).

According to the complaint, the acquiror violated the premerger notification and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”) by exercising operational control over aspects of the acquiree during the HSR Act waiting period. This is the first gun jumping action brought by the U.S. antitrust agencies since 2017 and is a reminder that the antitrust agencies are on the lookout for, and do bring, standalone HSR Act enforcement actions even when the agencies do not raise antitrust concerns with the underlying merits of the transaction.

The Complaint alleged the following facts: On November 3, 2023, the parties reached an acquisition agreement and filed the required HSR notification forms with the FTC shortly thereafter. Because the acquisition was subject to the premerger notification requirements of the HSR Act, the parties were required to continue to operate as separate and independent entities during the applicable HSR waiting period. On January 8, 2024, the DOJ issued a Second Request for additional information, extending the HSR waiting period pending the parties’ response to the Second Request. Ultimately, the waiting period expired on May 29, 2024, and the transaction closed without challenge by the government.

According to the DOJ’s Complaint, the acquiror allegedly engaged in illegal gun jumping by obtaining beneficial ownership of the acquiree’s business before the HSR waiting period had expired or been terminated. Specifically, the Complaint alleged:

• In May 2023, the acquiror won the right to manage an arena in California when the acquiree’s management lease expired, having competed with the acquiree for the business. However, during the HSR waiting period, the acquiror determined that the acquiree would continue to service the contract, which included (i) signing an agreement in December 2023 requiring the acquiree to book third-party events at the arena and (ii) requiring the acquiree to provide venue management services for the arena beginning in April 2024, thereby making key decisions on behalf of the acquiree before the waiting period had expired.
• The acquiror sought to discuss competitive bidding strategies with the acquiree. In August 2023 (while the acquiror and the acquiree were in discussions about the transaction, but before the HSR filing), the acquiror sought to prevent both it and the acquiree from making competing bids for the same management contract relating to an entertainment complex in North Carolina. Similarly, in May 2023, after transaction discussions began, the acquiror and the acquiree sought to coordinate and jointly bid for a contract related to a new university arena that each party had previously planned to bid for separately. This happened again in 2024 with a different university arena contract.
• The parties exchanged competitively sensitive information to construct the joint bids described above, including with respect to the arena development project. DOJ defined “competitively sensitive information” as “any non-public information of Defendant or any Competitor, including information relating to negotiating positions, tactics, or strategy; pricing or pricing strategies; Bids or Bidding strategies; intentions to Bid or not to Bid; decisions to Bid; whether a Bid was or was not submitted; and costs, revenues, profits, or margins.”

Although some of the conduct alleged in the Complaint occurred pre-signing, the DOJ’s proposed settlement limited the alleged HSR Act violation period to post-signing conduct, specifically, from December 7, 2023 (when the acquiror signed the agreement requiring the acquiree to book third-party events at the arena) to May 29, 2024 (when the HSR waiting period was terminated)—175 days in total. To settle this alleged violation, the acquiror agreed to a $3.5 million civil penalty, which amounted to approximately $20,000 per day or just under 40% of the maximum statutory penalty. The settlement will also require the acquiror to, among other things, refrain from certain conduct, appoint an Antitrust Compliance Officer, implement an antitrust training and compliance program, and submit regular compliance reports to DOJ. If the court adopts the proposed settlement (as is expected), the lawsuit will be resolved.

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• United States v. Legends Hosp. Parent Holdings, LLC

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