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With M&A activity at a lull, what’s an antitrust lawyer at the U.S. Department of Justice to do? It seems that the staff is using the slowdown to step up its enforcement of the Hart-Scott-Rodino Antitrust Improvements Act. On February 28 the agency filed a rare lawsuit under the law accusing Smithfield Foods, Inc., of twice failing to fulfill the act’s premerger notification requirements after the company acquired stock in its competitor, IBP, Inc. Earlier that month, the government reached a settlement with Gemstar-TV Guide International, Inc., for supposedly “gun-jumping,” or coordinating activities, before their merger closed, a separate violation of the 1976 act. According to a department spokeswoman, the last court action taken under the act was in 2001, when the agency sued Computer Associates Inc. for its alleged gun-jumping. That suit was settled last year. Of the two actions, the suit against Smithfield Foods may be the most significant. At issue is the act’s passive investor exemption, which excuses HSR filing if a stake in a company is acquired only for investment purposes. Smithfield apparently believes its IBP stock purchases fell within that exemption, even though it subsequently launched, but lost, a takeover bid for IBP. The Smithfield, Virginia � based meat producer would not comment on the litigation, whose damages are capped by statute at $5.478 million. According to David Beddow, a partner in the Washington, D.C., office of O’Melveny & Myers, “it’s not clear” who under the law is considered a passive investor and thus entitled to the exemption. But, says Beddow, who represented Gemstar-TV Guide before the agency, under HSR it is “suspect if you say you’re passive and you’re [also] a competitor.” The timing of the Smithfield and Gemstar actions could be mere coincidence, or they could signal that the previously quiescent area may become active while the merger market remains slow. A Justice Department spokeswoman would say only that the agency has long been concerned with the law. While companies previously may have “monkeyed around with HSR compliance, the agency may not have had the time to look at it before,” says Steven Sunshine, a partner in the Washington, D.C., office of Shearman & Sterling.

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