LEGAL
Telemarketing companies may face increased liability as a result of a recent Third Circuit decision that broadens standing under the Telephone Consumer Protection Act of 1991 (TCPA).
Under the TCPA, telemarketers cannot initiate a call to a residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party. Any “person or entity” may bring an action to enjoin violations of the TCPA and recover damages. District courts are split on the definition of any person or entity, which is varyingly interpreted to mean:
In Leyse v. Bank of America National Ass’n, the plaintiff received a landline call from a telemarketer promoting Bank of America credit cards. The plaintiff’s roommate was the telephone subscriber and intended recipient. The Third Circuit held that all parties who fall within the zone of interests protected by the TCPA have standing, including:
However, the Third Circuit noted that if the intended recipient had provided consent to receive robocalls, that consent would shield the telemarketer from any lawsuit brought by the actual recipient.
For more information on complying with the TCPA, see Expert Q&A: Far-Reaching Declaratory Ruling on the TCPA.
The SEC’s Division of Corporation Finance has published two new compliance and disclosure interpretations (C&DIs) on Rule 14a-4(a)(3) under the Exchange Act that may make it harder for reporting companies doing M&A deals to simultaneously undergo inversions or effect other fundamental corporate governance changes.
Rule 14a-4(a)(3) requires that proxy statements clearly and impartially identify each “separate matter” submitted to a shareholder vote (known as “unbundling”). The new C&DIs mandate that in deals where the target shareholders are to receive equity securities of the acquiror, any material changes intended to be made to the acquiror’s organizational documents must be put to the target shareholders for a vote. Contrary to the SEC’s previous guidance, these changes can no longer be considered subsumed within the one vote on the merger itself. They must instead be put to separate votes using separate boxes on the proxy card.
Examples of the kinds of amendments that are material and would require separate approval include:
Changes that are likely in most cases to not be considered material beyond the context of the transaction and would not require separate approval include:
In all cases, the parties are free to condition the closing on shareholder approval of any separate proposals.
For more information on the new C&DIs, see Legal Update, SEC Issues C&DIs to Unbundle Shareholder Votes on Proposed Corporate Governance Changes in Mergers.
Companies should train employees to respond appropriately if a competitor suggests price-fixing, known as an invitation to collude, as demonstrated by a recent FTC consent decree.
In In the Matter of Step N Grip, LLC, the FTC alleged that Step N Grip sent its closest competitor an email suggesting they collude on the price of a device to prevent rug curling. The email consisted of a single line, which read, “We both sell at $12.95? Or, $11.95?” The competitor reported the email to the FTC, which launched an investigation resulting in a consent decree with Step N Grip.
An invitation to collude is a unilateral proposal from one competitor to another to join together in a horizontal conspiracy, such as price-fixing. Invitations to collude are unlawful and are typically challenged by the FTC under Section 5 of the FTC Act. The FTC investigates allegations of invitations to collude even involving small companies or based on a single, brief communication.
Companies should train employees to:
Companies may also consider reporting any invitation to collude to the FTC.
For more information on federal antitrust analysis of invitations to collude, see Practice Note, Invitations to Collude.
This look at the major issues on the horizon for corporate counsel comes from Practical Law, an online legal know-how service. View all the looming issues now compliments of Practical Law The Journal, which covers the latest transactional and compliance topics that impact your practice. To gain access to more related know-how resources, please visit www.us.practicallaw.com.
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