On November 7, 2014, the U.S. Department of Justice Antitrust Division
announced a settlement to resolve charges that SierraPine Ltd. and Flakeboard America Limited violated the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) by improperly coordinating their
businesses prior to the expiration of the HSR waiting period.
The HSR Act requires parties to mergers or acquisitions that meet certain minimum thresholds to submit formal notification and to remain separate and
independent until the expiration of any applicable waiting periods.
Flakeboard and SierraPine each own and operate mills that produce particle board and medium-density fiberboard. In January 2014, SierraPine agreed to sell
three of its mills to Flakeboard. While the proposed merger was under review, however, the parties engaged in conduct that, according to the Antitrust
Division, constituted a failure to remain separate and independent during the HSR waiting period.
Specifically, the DOJ alleged that the parties coordinated with one another to shut down one of SierraPine’s mills and transfer those customers and certain
competitively sensitive information to Flakeboard. The HSR waiting period for this transaction had been extended for several months while the DOJ conducted
its investigation into the proposed transaction. Indeed, the parties ultimately abandoned the proposed transaction because of concerns expressed by the DOJ
that the deal potentially would have anticompetitive effects.
As part of the settlement, SierraPine and Flakeboard each must pay $1.9 million in civil penalties, Flakeboard must disgorge $1.15 million in profits
obtained as a result of the premerger coordination, and both companies must establish antitrust compliance programs. Notably, this is the first time the
DOJ has ordered disgorgement of profits as a penalty for violating the HSR Act.
The Flakeboard-SierraPine settlement serves as a reminder that parties must be careful to limit their integration activities until after any premerger
waiting periods have expired.
Antitrust and Trade Regulation Department has substantial experience with mergers and acquisitions. Our lawyers can assist you in reporting any potential transaction in compliance with, and
ensuring that your potential transaction does not run afoul of, the HSR Act.