FTC Settles HSR Premerger Reporting Violation Charge Against Biglari Holdings | Practical Law

FTC Settles HSR Premerger Reporting Violation Charge Against Biglari Holdings | Practical Law

The Federal Trade Commission recently announced a settlement with Biglari Holdings, Inc. in connection with Biglari's June 2011 acquisitions of Cracker Barrel Old Country Store, Inc.'s voting stock. Biglari has agreed to pay an $850,000 penalty for its failure to file a Hart-Scott-Rodino form before making these acquisitions. 

FTC Settles HSR Premerger Reporting Violation Charge Against Biglari Holdings

Practical Law Legal Update 5-521-6549 (Approx. 3 pages)

FTC Settles HSR Premerger Reporting Violation Charge Against Biglari Holdings

by PLC Antitrust
Published on 02 Oct 2012 • USA (National/Federal)
The Federal Trade Commission recently announced a settlement with Biglari Holdings, Inc. in connection with Biglari's June 2011 acquisitions of Cracker Barrel Old Country Store, Inc.'s voting stock. Biglari has agreed to pay an $850,000 penalty for its failure to file a Hart-Scott-Rodino form before making these acquisitions.
The Federal Trade Commission (FTC) recently announced an $850,000 settlement with Biglari Holdings, Inc. over allegations that Biglari violated premerger filing requirements under the Hart-Scott-Rodino (HSR) Act in connection with its 2011 acquisition of Cracker Barrel Old Country Store, Inc.'s voting stock. The complaint filed by the Department of Justice (DOJ) on behalf of the FTC alleged that Biglari both:
  • Improperly relied on the investment-only exemption to the HSR Act, which exempts acquisitions:
    • of 10% or less of the voting stock of a company; and
    • made solely for the purpose of investment (16 C.F.R. § 802.9).
  • Failed to file an HSR form to report its acquisitions of Cracker Barrel stock.
The HSR Act requires the parties to report certain acquisitions of voting securities to the FTC and DOJ before the acquiror purchases the stock where the parties and the transaction meet certain thresholds and no exemption applies. The HSR Act suspends transactions that require reporting, generally 30 days from the time of filing or earlier if the FTC or DOJ terminates the waiting period before expiration.
The DOJ's complaint alleges that:
  • On June 8, 2011, Biglari acquired shares of Cracker Barrel voting stock that brought the total value of its holdings in Cracker Barrel over the minimum HSR transaction size threshold.
  • Biglari continued to acquire Cracker Barrel voting stock until June 13, 2011.
  • Biglari failed to make the required HSR filing regarding the acquisitions, improperly relying on the passive investor exemption to the HSR Act.
The DOJ alleged that the passive investor exemption did not apply because Biglari showed intent to become actively involved in the management of Cracker Barrel by, among other things, pursuing seats on Cracker Barrel's board of directors. Therefore, the government found Biglari ineligible for the exemption and in violation of the HSR reporting requirements.
The FTC became aware of the violation on August 26, 2011, when Biglari made HSR filings to acquire additional shares of Cracker Barrel voting stock. Biglari was allegedly in violation of the HSR Act for 106 days, from June 8, 2011 to September 22, 2011, when the waiting period for its August filing expired. The maximum civil penalty is $16,000 per day. Biglari's average daily penalty was about $8,108.