chevron-down Created with Sketch Beta.

ARTICLE

DOJ Sues Private Equity Firm KKR & Co. for Alleged “Rinse-and-Repeat” Violations of HSR Act

John Lawrence Goheen III

DOJ Sues Private Equity Firm KKR & Co. for Alleged “Rinse-and-Repeat” Violations of HSR Act
Tim Grist Photography via Getty Images

On January 14, 2025, the Department of Justice (DOJ) sued private equity giant KKR & Co. (KKR) for numerous violations of antitrust law, alleging that KKR repeatedly violated its obligations to provide information on its acquisitions as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). If the DOJ is successful, KKR could be required to pay hundreds of millions in fines, among other relief.

Under the HSR Act, parties to transactions that meet the relevant monetary thresholds must file an HSR notification form with the DOJ and Federal Trade Commission (FTC) and observe a mandatory pre-closing waiting period. The HSR form requires certain information including specified internal company documents relating to the transaction (commonly referred to as “Item 4(c)/4(d) documents”). The DOJ and FTC consider these documents to be critical to their review during the initial waiting period and ultimately to their decision as to whether an extended investigation is warranted. By law, failing to provide these required documents or failing to file an HSR notification for reportable transactions exposes parties to significant financial penalties, including fines of $51,744 per day and potential delays to deal closing.

The DOJ alleges that KKR violated its HSR notification obligations in at least 16 transactions between 2021 and 2022, including by (1) failing to include all required documents, (2) altering documents (prior to submission to the DOJ and FTC, but after they had been finalized for internal/business purposes) to exclude antitrust sensitive content, and (3) failing to make a required HSR filing in two deals valued at $6.9 billion and between $376 - 919 million respectively. By allegedly omitting or altering documents, DOJ contends that KKR denied the DOJ and FTC the opportunity to properly review transactions before they closed, including deals involving direct competitors. The DOJ alleges these violations were systemic failures of KKR’s executives – who signed affidavits that the information in the HSR filings was correct and complete – and its outside counsel. The DOJ is seeking significant penalties under the HSR Act, including more than ten thousand days’ worth of fines that could exceed $650 million, as well as other equitable relief.

The DOJ’s complaint includes allegations regarding the action of KKR executives, including an allegation that one KKR partner “explicitly instructed a subordinate to ‘revise [a chart] for HSR purposes,’ and the subordinate followed that instruction by deleting material relating to ‘Competitive Behavior’ in a presentation deck analyzing KKR’s contemplated acquisition.” The DOJ also alleges that on another occasion, a KKR employee who allegedly omitted and altered multiple documents from an HSR filing described KKR’s approach to its premerger filing obligations: “I’ve always been told less is more 😊.” In response, a more senior executive replied, ‘I believe in less is more too. . . .’” The DOJ contends that KKR’s alleged violation of the HSR Act “stem from a failure by its executives and outside counsel to take the steps needed to ensure that KKR and its affiliates complied with the law.”

KKR disputes these allegations in a countersuit against the DOJ and FTC filed the same day, claiming the DOJ suit has “no legitimate basis” and is the result of agency “hostility towards mergers and acquisitions involving the private equity industry.” KKR further alleges that the DOJ’s case is simply a part of broader efforts by Biden-era antitrust enforcers on their way out the door to “chill merger and acquisition activity and target private equity firms” as part of a political agenda. KKR contends that the DOJ’s lawsuit is a “final act of agency overreach” which seeks to impose “draconian and grossly disproportionate penalties on KKR based on alleged pre-merger paperwork errors that were immaterial to antitrust clearance.”

This DOJ suit serves as a stark reminder to all transacting parties to take the filing obligations under the HSR Act seriously, particularly as more onerous HSR filing obligations are expected to take effect in the coming months. Parties to M&A transactions should work closely with experienced HSR counsel in preparing HSR filings to ensure they include all required information. Early and close engagement with antitrust counsel can ensure compliance with HSR requirements and avoid liability for violations.

    Author