FTC Challenges Reliance on “Investment-Only” Exemption

FTC Challenges Reliance on “Investment-Only” Exemption


By: Bernard (Barry) A. Nigro Jr., Philip Richter, Nathaniel L. Asker, Aleksandr B. Livshits

This week, the Federal Trade Commission announced a settlement of charges that Third Point, a well-known activist investor, improperly relied on the “investment-only” exemption to the reporting obligations under the Hart-Scott-Rodino Act.  This enforcement action is a harsh reminder of the FTC's narrow interpretation of the exemption and provides additional insight on the types of conduct that the FTC deems inconsistent with passive investment intent.  In a separate statement, the Director of the FTC's Bureau of Competition emphasized that the test for the “investment-only” exemption is the acquirer's intention, and merely “considering” or “expecting” to take certain actions may be sufficient to make the exemption inapplicable.

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