It's practically antitrust 101: If your deal is big enough, you have to report the transaction to the government.
Publicly traded holding company Biglari Holdings Inc. was busted by the Federal Trade Commission for failing to do so, and today agreed to pay $850,000 to settle the case.
In 2011, the company acquired an 8.7 percent stake in restaurant operator Cracker Barrel Old Country Store, Inc. - an investment in excess of $66 million, the threshold at the time for pre-merger reporting under the Hart-Scott-Rodino Act.
Biglari failed to notify the antitrust agencies, arguing that the law exempts acquisitions of up to 10 percent of voting securities if the acquisition is made solely for the purpose of investment, according to the FTC.
But the FTC didn't buy it. The agency alleged that Biglari intended to actively participate in the management of Cracker Barrel. Sardar Biglari, the company's chairman and CEO, reportedly met with the head of Cracker Barrel to offer suggestions on improving the restaurants and asked for two seats on the board of directors.
"Premerger notification requirements are critical to competition and consumers, and the FTC expects parties to comply with them," said FTC Chairman Jon Leibowitz in a news release. "The passive investment exemption is a narrow one, and we will not hesitate to seek civil penalties against companies that try to abuse it."
The FTC asked the Department of Justice to sue Biglari on its behalf. DOJ lawyers on September 25 filed suit in U.S. District Court for the District of Columbia. The FTC's vote to refer the complaint to DOJ and accept the proposed settlement was 5-0.
According to court papers, Biglari was represented by Kirkland & Ellis partner Bilal Sayyed, who could not immediately be reached for comment.