Canon and Toshiba have agreed to pay $2.5 million each to settle charges that they structured a deal so it would not be delayed by U.S. pre-merger notification laws.
Toshiba sold its medical systems subsidiary to Canon for $6.1 billion in March 2016 amid a financial crisis caused by an accounting scandal.
According to the U.S. Department of Justice, the Japanese companies hatched a scheme to evade notifying U.S. authorities of the deal so Toshiba could recognize the proceeds from the sale before the end of its fiscal year on March 31, 2016.
Under the Hart-Scott-Rodino Act, companies involved in an acquisition must notify the DoJ and the Federal Trade Commission before consummating the deal and observe a 30-day waiting period after they file the notification.
“The prior notice provisions of the HSR Act are designed to allow the agencies to analyze a proposed transaction before it is consummated to determine whether it will harm competition,” Bruce Hoffman, director of the FTC’s Bureau of Competition, said in a news release.
“Deliberately structuring a transaction to avoid or delay HSR filing undermines the efficacy of the pre-merger notification process, regardless of whether the parties’ motives for doing so in a particular case were anticompetitive,” he added.
Prosecutors said Toshiba began the process of selling its subsidiary in December 2015 but in early 2016, “faced a time frame that would make it difficult, if not impossible, to file pre-merger notifications and receive the necessary pre-merger clearances in several jurisdictions, including the United States” before the end of fiscal 2018.
Toshiba and Canon allegedly schemed to evade the HSR requirements by creating a special purpose company to which Toshiba transferred the voting shares of its subsidiary in exchange for a nominal payment of $900, while Canon nominally acquired only a non-voting share and options.
Later, in December 2016, Canon exercised its options and obtained formal control of the voting shares.
“An acquiring person may not enlist a third party to make an acquisition on its behalf to evade the HSR Act,” Assistant Attorney General Makan Delrahim said.