On November 22, 2024, the Securities and Exchange Commission (the “SEC” or “Commission”) announced its enforcement results for the fiscal year (“FY”) 2024. Though the SEC filed only 583 total enforcement actions in FY 2024—a decline of 26% from the 784 enforcement actions filed in FY 2023—the Commission obtained a record-setting $8.2 billion in financial remedies, which includes civil penalties and disgorgement amounts combined. Notably, 56% of the $8.2 billion in financial remedies was the result of a monetary judgment awarded in a single matter.

Continue Reading SEC Enforcement Highlights for Fiscal Year 2024

Today, in a highly anticipated decision, a Texas federal district court judge struck down the U.S. Department of Labor’s final regulation that increased the salary threshold for the “white collar” exemptions under the Fair Labor Standards Act (FLSA). The next salary threshold increase under the rule was scheduled to take effect on January 1, 2025. However, because the court’s ruling applies to all employers nationwide, that increase in the overtime threshold will no longer take effect.

On November 12, 2024, the Antitrust Division of the United States Department of Justice (DOJ) published updated guidance for its Evaluation of Corporate Compliance Programs in Antitrust Investigations. First published in 2019, the DOJ has updated its guidance several times since.  The guidance is intended to educate the public and to guide prosecutors in making charging decisions and sentencing recommendations for criminal antitrust violations. 

Continue Reading Takeaways from the Department of Justice’s November 2024 Corporate Compliance Program Guidelines
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On November 12, 2024, the Federal Trade Commission (“FTC”) published its Final Rule and Statement of Basis and Purpose amending the Premerger Notification and Report Form filed for transactions reported under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”). 

Unless the Final Rule is delayed or rescinded by the FTC, the new Form must be used for all filings made on or after February 10, 2025.

You can read more about the changes to the HSR Form and the associated increased burden on filing parties here.

On July 30, 2024, the Federal Deposit Insurance Corporation (FDIC) proposed amendments to regulations under the Change in Bank Control Act of 1978 (the CBCA) that would subject certain acquisitions of holding companies of FDIC-supervised institutions to FDIC advance notice requirements. 

Continue Reading FDIC Proposes Rule Amendments to Expand Its Role in Reviewing Depository Institution Holding Company Acquisitions

On October 10, 2024, the Federal Trade Commission (“FTC”) released final revisions of the rules that govern filings under the Hart-Scott-Rodino (“HSR”) Antitrust Improvements Act of 1976, as amended (the “Final Rules”). The Final Rules will take effect 90 days after they are ultimately published in the Federal Register.

The FTC scaled back or eliminated several categories of information currently required in HSR forms, but expanded others and added several new categories of information and data. The FTC estimates that completing the revised form will require an additional 68 hours of work per filing. In many cases, it will be much higher than that given the increased regulatory burden and information requests.

1. Major changes in content of HSR forms.

The FTC added several new requirements for information. Among the most significant are the following:

  • Explain the strategic rationale for the proposed transaction.
  • Identify additional minority interest holders, and make additional disclosures with respect to funds, investment groups, and similar entities.
  • Submit a diagram of the transaction (if one exists) and explain all relationships between the entities involved.
  • Provide detailed information and descriptions related to overlaps and supply arrangements within the United States between the parties.
  • Provide English translations of all foreign-language documents.
  • Require separate forms (with different information) for acquiring and acquired parties, and require information about prior acquisitions by acquired parties.

A number of these new requirements could add a significant burden to the filing parties, and some may have implications for companies’ ordinary course of business activities.

2. Requirement of specific transaction terms: filing only on a general letter of intent (“LOI”) or other preliminary agreement no longer permitted unless key terms are described.

The Final Rules no longer permit HSR forms (which trigger the initial waiting period) based only on an executed but non-binding preliminary LOI or basic term sheet if such document does not describe the transaction with specificity.  Currently, parties may file on any signed document, no matter how sparse, that simply evidences a good-faith intent to consummate a transaction. Under the Final Rules, where the parties file on a “preliminary agreement” like an LOI, it must include “some combination of the following terms: the identity of the parties; the structure of the transaction; the scope of what is being acquired; calculation of the purchase price; an estimated closing timeline; employee retention policies, including with respect to key personnel; post-closing governance; and transaction expenses or other material terms.” If it does not, the parties must also submit an additional, dated document (such as a draft agreement or detailed term sheet) that describes the agreement with the requisite specificity.

This new requirement will largely eliminate filing on a basic non-binding LOI where there are not advanced drafts of a purchase agreement or a detailed term sheet already negotiated between the parties.

3. Expanded scope for Item 4(c)/(d) documents to include the identified deal team lead and certain business plans prepared in the ordinary course of business.

The scope of documents responsive to Items 4(c) and 4(d) of the HSR form will be expanded.  Currently, these items require the filing person to submit pertinent documents that were prepared by or for officers or directors (or similar individuals for non-corporate entities). The revised rules cover pertinent documents prepared by or for an identified “supervisory deal team lead,” defined as the non-director/officer individual with “primary responsibility” for supervising the strategic assessment of the deal.

Notably, the Final Rules omit a requirement in the initial proposal that drafts of responsive documents must always be submitted. This would have imposed extraordinarily burdensome obligations on deal teams, as draft documents currently must be submitted only if they were shared with the entire board of directors or similar body. Under the Final Rules, drafts must be submitted if shared with any member of the board.

The revised rules also require submission of certain business plans and reports that analyze market shares, competition, competitors, or markets relating to any product or service sold by the other party. Currently, the filing person is not required to submit its own documents that were prepared in the ordinary course of business (although such documents are commonly requested when the DOJ or FTC opens an initial investigation and requests the voluntary production of documents). In response to comments, however, the Final Rules limit the reporting requirement to those quarterly, semi-annual, or annual plans and reports that were provided to the CEO within one year of the filing date, and any responsive reports (even those not regularly prepared) provided to the board within one year of the filing date.

Going forward, companies should consider this new filing requirement when drafting and distributing ordinary course documents that discuss competition topics, and carefully review characterizations of business segments, markets, competitors and other pertinent topics, recognizing that such documents may have to be submitted to the government with a future HSR filing.

4. Requirement for top customer/supplier information.

Filing parties will now be required to list their top 10 customers for overlapping products, and the top 10 customers and suppliers for products supplied to or purchased from the other party to the transaction. Currently, the agencies request customer and supplier information only in a preliminary investigation opened during the initial 30-day waiting period (when compliance with the request is voluntary), or as part of a formal “Second Request” near the end of the waiting period.

Although the Final Rules decline to adopt an earlier proposal to provide contact information for these customers and suppliers, this new requirement may nonetheless require parties to consider notifying top customers and suppliers that they have been identified in the HSR form. For non-publicly disclosed transactions, disclosure of the potential transaction to such customers and suppliers may need to occur earlier than the parties typically would disclose a proposed transaction. 

5. Impact on timeline for work on HSR filings.

As a result of the dramatic increase in information required, filing parties will likely need to begin work on HSR forms earlier in the transaction process. They may also need to develop and implement well before closing communication plans with key constituencies such as customers, suppliers and employees due to the regulatory process, and to assist in mitigating relationship issues and market rumors.

Laptop, stethoscope and doctor writing in notebook for research planning or medical tech innovation in hospital office. Healthcare medic worker, research strategy book notes and online communication

On September 28, 2024, California governor Gavin Newsom vetoed AB 3129, a bill that, among other things, would have required private equity firms and hedge funds to provide 90 days’ prior written notice to, and for some transactions, obtain consent from, the state attorney general prior to proceeding with certain health care transactions.

In a statement attached to his decision to veto AB 3129, the governor cited concerns regarding the redundancy of the bill given that under current law the state’s Office of Health Care Affordability (OHCA) is responsible for analyzing and evaluating certain health care consolidation transactions. While OHCA does not have the power to block a covered transaction, OHCA may refer to and coordinate with the state’s attorney general to review any transactions that may be anti-competitive or affect health care affordability.

In light of the recent increase in federal and state scrutiny of private equity investments in health care about which we have previously written, we will continue to monitor regulatory developments in this area.

If you have any questions about this article, please contact Jeremy M. Alexander at jmalexander@vedderprice.com or the Vedder Price attorney with whom you normally work.

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The Federal Trade Commission (“FTC”) has filed a Complaint and a proposed Consent Order that would bar the CEO of oil company Hess from sitting on the Board of Chevron after the merger of the two companies.  According to the Complaint filed in the matter on September 29, CEO John B. Hess has a long history of encouraging high-level OPEC executives in their stated mission to stabilizing pricing in oil markets.  The merger agreement between the parties requires them to appoint Mr. Hess a Director of Chevron, the surviving company. 

OPEC oil producers account for approximately 50 percent of global crude oil production.  Because Chevron is one of the 10 largest oil enterprises in the world and the fourth largest public, non-state-owned oil company, the Complaint alleges, Mr. Hess’s “participation on Chevron’s Board of Directors would amplify Mr. Hess’s supportive messaging to OPEC and others … increasing the likelihood of a lessening of competition in the relevant market [for the production and sale of oil].” Compl., ¶ 11.  The Consent Order would prohibit Mr. Hess from serving on the Chevron Board or in an advisory capacity, with certain limited exceptions.

This matter is notable because the Complaint does not allege that the merger of Hess and Chevron would harm competition in any relevant market.  Its focus is entirely on preventing a single person with an alleged demonstrated affinity for price stability from sitting on the Board of Directors of the combined company.  In doing so, the FTC raises concerns similar to those behind the Department of Justice’s reinvigorated enforcement of Section 8 of the Clayton Act, which prohibits many director and officer interlocks between competitors; and the case stakes out the FTC’s position that a company is only as competitive as the people who run it.

On July 25, 2024, the U.S. District Court for the Eastern District of Texas stayed the U.S. Department of Labor’s (DOL) recently-issued final rule, set to take effect September 23, 2024, which would amend the definition of an “investment advice fiduciary” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (the 2024 Rule).  One day later, in a separate case challenging the 2024 Rule, the U.S. District Court for the Northern District of Texas also stayed the 2024 Rule on similar grounds.  Both decisions stay the effective date of the 2024 Rule indefinitely while the cases are pending.

Continue Reading Two Federal District Courts Stay DOL Fiduciary Rule

Judge Ada E. Brown of the Northern District of Texas this afternoon granted summary judgment in favor of Ryan, LLC and the plaintiff-intervenors in the case of Ryan, LLC v. Federal Trade Commission challenging the FTC’s ban on post-employment non-competes (“Non-Compete Rule”). Judge Brown concluded that the FTC lacked statutory authority to promulgate the Non-Compete Rule, and that the Non-Compete Rule is arbitrary and capricious. Accordingly, Judge Brown set aside the Non‑Compete Rule and ordered that it will not be enforceable or take effect on its original effective date of September 4, 2024 or thereafter.