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TheStreet Open House

Crest Financial Sends Letter To FCC Objecting To SoftBank's Pre-Merger Coordination With Sprint

Stocks in this article: CLWR

HOUSTON, May 29, 2013 /PRNewswire-USNewswire/ -- Crest Financial Limited, the largest of the independent minority stockholders of Clearwire Corporation (NASDAQ: CLWR), yesterday sent a letter to the Federal Communications Commission urging the Commission to investigate the "gun-jumping" implications of SoftBank's and Sprint's "apparent indifference to the Commission's public interest inquiry."  Although the FCC's review is ongoing and SoftBank is in a bidding war with DISH Network for control of Sprint, "SoftBank has been directing and manipulating Sprint's critical business decisions as if its merger with Sprint were already approved," Crest wrote. 

Crest stated that the FCC could decide to "deny SoftBank's attempted merger with Sprint for being contrary to the public interest or posing a risk to national security" or "hold its decision in abeyance until the Sprint Board of Directors determines whether to pursue a deal with DISH."  As a result, Crest said the "uncertainty makes it all the more inappropriate that SoftBank continues to control Sprint from the shadows before the Commission completes its public interest review."

Crest noted that this "sort of pre-merger coordination is not tolerated by other federal regulators charged with protecting the public interest."  Crest asked the FCC not to tolerate it either. In the antitrust context, Crest stated, "Merging companies are prohibited from coordinating business activities while the merger is subject to the Hart-Scott-Rodino Act waiting period." Merging companies improperly "jump the gun," according to Crest, "when they collaborate to further the merger process and start combining their day-to-day operations before the end of the [Hart-Scott-Rodino Act] waiting period." Department of Justice officials have explained that "gun-jumping is a serious matter" and that the Department "will proceed against parties who fail to respect the law with regard to preconsummation conduct." 

Gun-jumping charges have led to settlements in excess of a million dollars. For instance, Crest noted that the Department of Justice has filed gun-jumping charges where merger agreement provisions "substantially altered" the seller's "ordinary business practices, showing that it had ceded its control to buyer." Likewise, according to Crest, Department of Justice officials have stated that merging parties must "continue to operate independently pending consummation of their transaction."

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