A Madison Square Garden Company ("MSG") executive settled Federal Trade Commission ("FTC") allegations of failing to report the acquisition of voting securities of MSG in 2017.

As described more fully in a Cadwalader Memorandum, the DOJ, at the request of the FTC, alleged that James L. Dolan failed to (i) notify the FTC and the DOJ of proposed acquisitions that would result in the holding of voting securities above certain dollar thresholds and (ii) observe a waiting period before completing their transactions.

According to the DOJ and the FTC, Mr. Dolan received restricted stock units ("RSUs") as part of his compensation as the Executive Chair and a Director of MSG. He properly filed a Hart-Scott-Rodino ("HSR") Act notification on August 16, 2016, for an acquisition of MSG voting securities due to vesting RSUs that would result in holdings exceeding the $50 million threshold, as adjusted. Early termination of the HSR Act's waiting period was granted on September 6, 2016, and Mr. Dolan completed his acquisition three days later. Until September 6, 2021, Mr. Dolan was permitted to acquire additional MSG shares without an HSR filing, so long as he did not exceed the $100 million threshold, as adjusted.

On September 11, 2017, without filing under the HSR Act or observing the HSR waiting period, Mr. Dolan acquired additional MSG shares due to vesting RSUs that resulted in Mr. Dolan's holding voting securities of MSG valued in excess of the $100 million threshold, as adjusted. The DOJ alleged that Mr. Dolan was in continuous violation of the HSR Act from his acquisition on September 11, 2017, until the HSR waiting period expired on his corrective filing on December 26, 2017.

Based on the current maximum civil penalty of $41,484 per day (adjusted annually) for an HSR violation, Mr. Dolan could have been fined over $4 million. Mr. Dolan agreed to pay $609,810 to settle the FTC lawsuit.

Commentary / Joel Mitnick

The FTC typically will give "one free bite at the apple," declining to seek civil penalties for the first inadvertent failure to file if the person self-reports the violation and makes a corrective filing. According to the Complaint, Mr. Dolan had been given a "free bite at the apple" for previously violating the HSR Act.

Companies and executives should monitor holdings and equity compensation schedules in order to determine potential HSR filing requirements and avoid potential fines of up to $41,484 (adjusted annually) per day. HSR rules and filing obligations can be complex and may change through amendments to the regulations or through formal and informal interpretations issued by the FTC. Experienced HSR counsel should be consulted to determine whether an acquisition will trigger a filing requirement and, if so, whether an exemption is available

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