$900,000 DOJ Antitrust Settlement Highlights Gun-Jumping Risk
January 28, 2010
Last weeks $900,000 settlement between Smithfield Foods and the Antitrust Division of the U.S. Department of Justice (the DOJ) is a harsh reminder of the significant penalties parties to a merger may face for engaging in joint activities prior to clearing the pre-transaction notification process under the Hart Scott Rodino Antitrust Improvements Act of 1976 (the HSR Act). Under the HSR Act, parties to a covered transaction are prohibited from transferring a beneficial interest or any operational control from the seller to the buyer prior to receiving HSR Act clearance -- a violation known as gun-jumping, that carries a maximum fine of $16,000 per day. While this area of the law unfortunately remains murky, the Smithfield Foods settlement is clearly a government message that merger parties should be wary of testing the limits. Below is further detail on the Smithfield Foods settlement, and some general guidelines for merger parties to follow.