ESL Partners and ZAM Holdings Agree to Pay $800,000 in Civil Penalties for Premerger Filing Violations

The Federal Trade Commission today announced the filing of a complaint in federal district court charging two investment funds, ESL Partners, L.P. and ZAM Holdings, L.P., with violating federal law by failing to make timely filings with the government prior to acquiring blocks of AutoZone, Inc. shares in September and October of 2004. To settle the Commission’s charges, ESL Partners and ZAM will pay civil penalties of $525,000 and $275,000, respectively. The action was filed in Washington, D.C. by FTC attorneys acting as deputized agents of the U.S. Department of Justice.

According to the complaint, on September 28, September 30, October 12, and October 14, 2004, ESL Partners made purchases of AutoZone voting securities, adding to its earlier purchases of AutoZone stock. Based on these holdings, ESL Partners met the financial thresholds of the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act), and was therefore required to file premerger notification forms with the government and wait before completing the AutoZone share purchases. The complaint also states that ESL Partners failed to file the required notification forms until January 27, 2005, after being notified by the FTC that such a filing was necessary. Thus, ESL was in violation of the Act from September 28, 2004, through the expiration of the HSR Act waiting period on February 28, 2005.

Separately, the complaint also states that on October 12 and October 14, 2004, ESL Investors, an investment fund owned by ZAM Holdings, also bought blocks of AutoZone voting securities. While it was required to file premerger notification forms and observe the 30-day HSR Act waiting period, it failed to make the filings with the government. In January 2005, the FTC contacted the managing partner and inquired why no HSR filings had been made. ZAM Holdings subsequently made the required filings on January 31, 2005, to cover the 2004 purchases. Accordingly, ZAM Holdings was in violation of the HSR Act from October 12, 2004, through the expiration of the premerger waiting period on March 2, 2005.

“The Commission takes the premerger notification requirements of the HSR Act very seriously and will not hesitate to take action when companies or individuals shirk their filing responsibilities,” said Acting FTC Bureau of Competition Director David P. Wales. “Thirty years after becoming law, the HSR Act and its filing requirements should be well known to companies and individuals making acquisitions and the significant civil penalties imposed here should reinforce the need to fully comply with the Act.”

Under the terms of the proposed final judgment settling the charges, the defendants will pay civil penalties to the U.S. Treasury totaling $800,000. The companies are required to pay the respective penalties within 30 days of the date the final judgment is entered by the court.

The Commission vote to refer the complaint to the U.S. Department of Justice for filing on the FTC’s behalf was 4-0. The complaint and proposed final judgment were filed today in the U.S. District Court for the District of Columbia.

(FTC File No. 051-0091; Civ. No. 1:08-cv-02175)
(ESL Partners.final.wpd)