Third Point To Settle With FTC On Antitrust Charges Related To 2011 Yahoo Stake

(RTTNews) - The Federal Trade commission said Monday that Three affiliated hedge fund companies and their management company, Third Point LLC, have agreed to settle Federal Trade Commission charges that they violated premerger reporting laws in connection with their 2011 acquisitions of stock in Yahoo! Inc. (YHOO).

The complaint alleged that Third Point Partners Qualified L.P., Third Point Ultra, LTD, and Third Point Offshore Fund, LTD failed to observe the filing and waiting requirements of the Hart-Scott-Rodino Act before purchasing shares in Yahoo.

According to the complaint, the three defendant funds claimed that they were exempt from reporting to the U.S. antitrust authorities because the purchases were made solely for investment purposes. At the time of the stock purchases, however, defendant Third Point LLC, which made investment decisions on behalf of the funds, was taking actions inconsistent with an investment-only intent, such as communicating with third parties to determine their interest in becoming the CEO or a board candidate of Yahoo.

The HSR Act requires that companies and individuals notify the FTC and the Department of Justice of most large transactions that affect commerce in the United States. Those acquirers must then observe a waiting period before closing their transaction, while one of the two agencies determines whether the transaction may result in a substantial lessening of competition. The HSR Act exempts acquisitions of up to ten percent of voting securities if they are made solely for investment purposes.

As per the terms of the proposed stipulated five-year federal court order, the defendants are prohibited from relying on the investment-only exemption if they have contacted third parties to gauge their interest in joining the board of the target company, communicated with the target company about proposed candidates for its board, or engaged in other specified conduct in the four months prior to acquiring voting securities above the HSR Act threshold. In this case, the agencies determined not to seek civil penalties based on several factors, including that the violation was inadvertent and short-lived, and this was the defendants' first violation of the HSR Act.

The Commission vote to refer the complaint and proposed settlement to the U.S. Department of Justice for filing in federal court was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright voting no. The Commission issued a statement and Commissioners Ohlhausen and Wright issued a dissenting statement.

The Department of Justice today filed the complaint and proposed order in the U.S. District Court for the District of Columbia.