When an enforcement action for a violation of the Hart-Scott-Rodino Act is announced, chances are the matter has already come to a close – by the time the action becomes public, the agency and the parties usually have agreed upon financial penalties and other sanctions to be levied. But that is not the case for ValueAct Capital and its affiliated investment funds. After the Department of Justice filed a complaint against ValueAct on April 4, the company did not take the allegations lying down. Instead, it vowed to vigorously defend its position.

The HSR Act, among other things, requires certain investors to file notice with the Department of Justice and Federal Trade Commission, and to put off acquiring stock valued above the reporting thresholds (presently $78.2 million) until the agencies have completed their review of the investment’s potential for anticompetitive impact. The HSR rules provide several exemptions, including an exemption for purely passive investors that hold less than 10% of a company’s voting stock. The rub is that the agency views the exemption very narrowly, and any intent to do more than simply holding the stock for investment likely will draw the agency’s ire. In the complaint filed against certain ValueAct Capital entities for violating the HSR Act with respect to the purchase of over $2.5 billion of Halliburton and Baker Hughes stock following the companies’ November 17, 2014 merger announcement, the agency is seeking civil penalties of $19 million plus an injunction against further violations.