Following a Federal Trade Commission investigation, Titan Wheel International, Inc., a Quincy, Illinois-based wheel manufacturer, has agreed to pay a $130,000 civil penalty -- the maximum allowable under law -- to settle federal charges that it took control of a Des Moines tire plant of Pirelli Armstrong Tire Corporation before the allotted time for federal antitrust review of the $41 million acquisition had expired. The government alleged that Titan took control of the Pirelli assets -- including the inventory, machinery, equipment and customer and supplier lists -- before the companies even notified the nation’s two federal antitrust agencies regarding the merger. Titan was in continuous violation of the law until the purchase agreement in the acquisition was amended and control of the plant returned to Pirelli Armstrong, a total of 13 days, the government alleged.
Tire manufacturer Pirelli Armstrong is based in New Haven, Connecticut, and is a subsidiary of the Italian firm, Pirelli S.p.A. According to the federal complaint in the case, Titan and Pirelli Armstrong entered into an asset purchase agreement that, effective July 17, 1994, gave Titan control of the Pirelli Armstrong Des Moines plant and other assets. The companies did not file documents describing the acquisition with the FTC and the Department of Justice until July 20.
Federal law -- the Hart-Scott-Rodino (HSR) Act -- requires companies contemplating acquisitions or mergers that meet certain thresholds to file premerger notification documents with the FTC and Department of Justice and observe certain waiting periods before consummating the deal. The HSR Act also sets waiting periods, during which time one of the two agencies will review the transaction to determine whether it believes the deal would violate federal antitrust laws. If the government determines to try to block the deal, it typically acts before the waiting periods expire, after which the companies can go ahead with the deal.
According to the government complaint, Titan and Pirelli Armstrong amended their asset purchase agreement on July 29, 1994, to transfer ownership of the Des Moines plant and related assets back to Pirelli Armstrong. The FTC and Justice then terminated the waiting period early, on Aug. 5, 1994, a signal that neither planned to challenge the transaction on antitrust grounds. Nonetheless, the government charged, Titan was in violation of the notification and waiting period requirements of the HSR Act from July 17 through July 29.
The HSR Act provides for civil penalties of up to $10,000 per day for violations. The $130,000 civil penalty Titan has agreed to pay under the proposed consent judgment to settle this case is the maximum allowable for the 13 days it allegedly was in violation.
“Advance notice of acquisitions under the HSR Act is essential to preventing anticompetitive acquisitions that would cause consumer injury in the form of higher prices or reduced quality,” said William J. Baer, Director of the FTC’s Bureau of Competition. “This is the third complaint that resulted from FTC investigations in the last four months for failure to comply with the HSR Act, resulting in civil penalties of $6.2 million. Those earlier actions and the action the government filed today show the substantial penalties companies face if they don’t live up to their obligations.”
The complaint and proposed consent judgment were filed by FTC attorneys on behalf of DOJ, acting as special attorneys to the U.S. Attorney General, in U.S. District Court for the District of Columbia, on May 6. The Commission vote in the matter was 5-0.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation.
Copies of the complaint and proposed consent judgment are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580: 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it happens, call the FTC’s NewsPhone at 202-326-2710. FTC news releases and other documents also are available on the Internet at the FTC’s World Wide Web Site at http://www.ftc.gov
(FTC File No. 941 0110)
(Civil Action No.96 1040)