FTC Cautions Against Improper Reliance On "Investment-Only" Exemption

Investment manager Third Point LLC and three of its affiliated funds have entered into a proposed settlement agreement with the federal antitrust authorities for violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, arising from improper reliance on the "investment-only" exemption. According to the Federal Trade Commission, Third Point failed to obtain HSR clearance in 2011 prior to acquiring voting securities of Yahoo! Inc. in excess of the then-applicable $66 million threshold of the act, relying on the investment-only exemption despite taking action deemed to be inconsistent with passive investment intent. This enforcement action and related FTC guidance reminds investors that the investment-only exemption continues to be narrowly construed, and that enforcing compliance with the HSR Act remains a top priority of the federal antitrust authorities even where a transaction involves a minority stake and does not pose competition issues.