Recent regulatory action by the FTC highlights why it is so important for merging parties to timely plan for and implement internal controls to ensure compliance with all aspects of negotiated resolutions to merger challenges. On December 4, 2023, the FTC filed a complaint in federal court alleging that 7-Eleven violated certain “prior notice” provisions in a 2018 consent decree that required 7-Eleven to provide the FTC with information concerning certain potential transactions. The FTC’s challenge comes a little over two years after the FTC in October 2021 issued its “prior approval” policy statement, noting that, going forward, prior approval provisions would be included in the FTC’s consent decrees resolving merger challenges. Taken together, the FTC’s actions highlight the need for companies (and in-house and outside counsel assisting them) to monitor and enforce compliance with these prior notice and approval provisions.
In 2018, 7-Eleven purchased over 1,000 retail fuel outlets from Sunoco. The FTC raised concerns that the transaction would lessen competition in certain geographic markets, and, as a result, 7-Eleven agreed to divest certain retail fuel outlets (or leave them with Sunoco). As part of the consent decree approving the transaction, 7-Eleven was required to provide advance written notification to the FTC if it purchased an interest in certain retail fuel outlets identified by the FTC on a non-public schedule. That notice was to include the information required in a Hart-Scott-Rodino Act form, as well as information related to other retail fuel outlets in the same geographic area.
In its suit, the FTC alleges that, after entering into this consent decree, 7-Eleven acquired a leasehold in a St. Petersburg, Florida retail fuel outlet listed on the non-public schedule, but did not provide notice to the FTC of the acquisition. The complaint then alleges that 7-Eleven subsequently sold the acquired St. Petersburg outlet to a third party after it disclosed the acquisition to the FTC.
The FTC additionally alleges that 7-Eleven submitted certain reports concerning its compliance with the consent decree, and that eight of these reports contained false certifications that 7-Eleven was complying with its obligations. The FTC further alleges that 7-Eleven’s internal controls for compliance with the consent decree were inadequate, although details concerning 7-Eleven’s controls were redacted from the complaint. The FTC is seeking civil penalties of up to $77 million for 7-Eleven’s alleged violation.
7-Eleven has not yet filed a responsive pleading, but in a public statement it explained it has “been working in good faith with the FTC to rectify an oversight involving one store in St. Petersburg, Florida.” The statement also stated that 7-Eleven “self-report[ed]” to the FTC “after discovering this unintentional error” and then “divested this store expeditiously.”