One rarely accumulates a net worth of $1.9 billion without breaking the rules. Repeatedly. IAC chairman Barry Diller has agreed to pay $480,000 in civil penalties for anti-trust violations related to his purchase of voting shares in Coca-Cola from 2010 to 2012.
But this is hardly Diller's first anti-trust rodeo.
According to the complaint (below), Diller committed a similar violation in 1998 when he purchased voting securities in CitySearch while chairman of USA Networks. In both cases, Diller violated premerger reporting and waiting requirements related to the HSR Act, which regulates mergers and acquisitions.
The Hart-Scott-Rodino (HSR) Act requires that parties notify the FTC and the Department of Justice of most large transactions that affect commerce in the United States. After doing so, parties must observe a waiting period before closing their transaction, while one of the two agencies determines whether the transaction may result in a substantial lessening of competition.
Back in 1998, the FTC did not seek civil penalties, but made Diller "accountable for instituting an effective program to ensure full compliance with the Act's requirements."
According to the complaint, Diller, an investor with many holdings in media companies, acquired 120,000 shares of Coca Cola on November 1, 2010. As a result, he held voting securities of more than $63.4 million, the premerger reporting threshold under the HSR Act at the time. Between November 1, 2010, and April 26, 2012, Diller acquired an additional 605,000 shares of Coca Cola voting securities, but failed to submit the requisite HSR filings. In addition, on April 27, 2012, he acquired 264,000 more shares and again failed to meet his HSR filing requirements. Diller subsequently made corrective filings.
Companies and executives who violate the HSR Act rarely yield criminal charges. It seems the feds are hoping $480,000—about 0.025 percent of Diller's net worth—will be enough to make sure the media mogul doesn't sin again.
UPDATE: Here is a statement regarding the settlement from Diller, who does not want to "burden the public with more words on this matter," except these five paragraphs, of course.
While I do not dispute the facts the Federal Trade Commission chose to selectively highlight in their press release regarding my agreement to pay a fine for the purchase of Coca Cola shares, I was dismayed at what they failed to say. I chose to settle this matter rather than pursue the time and expense of a court challenge because the FTC agreed to accept a small fraction of the fines that their theory, if accurate, would have entitled them to. In fact, I am told that the amount I agreed to pay is one of the smallest percentages the FTC has settled for with respect to purported violations of the HSR Act. I had assumed that the FTC would explain why it agreed to such a small settlement, but since they did not, I feel it is important that the relevant facts are noted.
Firstly, the original infraction cited by the FTC was a technical failure to file by USA Networks in 1998 in connection with a transaction that was initially below the HSR thresholds. Once USA Networks discovered that the transaction value had increased during the process, the company promptly notified the FTC, and filed immediately thereafter at the FTCs' request. In fact, the FTC did not seek to impose any fines or penalties in that matter.
As to the Coca-Cola purchases, I made those in my personal capacity. I was not made aware of the necessity to file, and the moment I became aware, I filed promptly and complied with all regulations - the only infraction was in the timing. I gained no advantage of any kind and there was no harm to Coca-Cola shareholders, nor to anyone else. While I am surely not suffering, one can fairly question the tactics used by the FTC in penalizing individuals for de minimis open market share purchases and inadvertent paper shuffling.
This matter highlights the need for the antitrust agencies to make explicit that officers and directors that choose to align their interests more closely with the shareholders they serve should be subject to higher HSR thresholds. My understanding is that the HSR Act is designed to help our government prevent anti-competitive deals. It is inconceivable that my less than % investment in Coca-Cola shares, made as a director of Coca-Cola, could harm competition. Ironically, corporate governance gurus encourage such purchases, while the FTC seeks to deter them through filing fees, delays and fines. I do not know the rationale for the government to penalize such purchases with hundreds of thousands of dollars in HSR filing fees.
I don't want to burden the public with more words on this matter - the only reason for this statement is because I care about good citizenship and good government, and it would be unfair to both not to comment.
[Image via Getty]