Malone Fined $1.4 Million Over Discovery Share Buys

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Liberty Media chairman John Malone agreed to pay $1.4 million as part of a settlement with the U.S. Dept. of Justice on Tuesday, stemming from the media mogul's accumulation of voting shares in Discovery Holding Co. 

The DOJ's Antitrust Division, at the request of the Federal Trade Commission, filed a civil antitrust suit today in U.S. District Court in Washington, D.C. against Malone for violating the notification requirements of the Hart-Scott Rodino Act of 1976. At the same time, DOJ filed a proposed settlement that if approved by the court, will settle the charges. Malone has already agreed to the settlement.
According to the complaint, Malone failed to comply with the antitrust premerger notification requirements of the HSR Act before acquiring voting securities of Discovery in August 2005, and continued to acquire Discovery voting securities through April 2008. On June 12, 2008, Malone made a corrective filing for the acquisitions of Discovery voting securities. Before the expiration of the waiting period triggered by the June 12, 2008, filing, Malone made additional acquisitions of Discovery voting securities on June 14, 2008, when he exercised two options. Malone exercised these options using an escrow arrangement, but the escrow arrangement did not prevent beneficial ownership of the voting securities from passing to Malone in violation of the Act. The complaint alleges that Malone was in violation of the HSR Act from Aug. 9, 2005, through July 14, 2008.
Discovery Holding was a tracking stock that included Liberty's 50% interest in Discovery Communications, but not remained of the company controlled equally by Cox Communications and Advance/Newhouse Communications. In 2007 Cox sold its 25% interest in Discovery for $1.3 billion in cash and the Travel Channel, boosting Liberty's interest to around 66% and Advance Newhouse's interest to about 33%.

In 2008 Discovery Holding was dissolved and Discovery Communications was formed.