| What you need to know - key takeaways |
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- Gun-jumping (i.e. failure to notify a transaction or implementation a transaction in breach of the standstill obligation) can take many forms, including: exercising negative control over certain strategic matters of the target; instructing the target how to conduct its business; and sharing commercially sensitive information outside of any "cleanroom" arrangement.
- Partial impartial implementation of a transaction might constitute gun-jumping.
- Merging parties need to ensure that safeguards are in place (on all sides of a deal) to minimise the risks of any conduct which might qualify as gun-jumping.
- The Commission can impose fines of up to 10% of annual group worldwide turnover for gun-jumping.
- The limitation period for the Commission to impose fines for gun-jumping is five years.
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Altice is a multinational cable and telecommunications company based in the Netherlands. In February 2015, Altice notified the Commission of its plans to acquire PT Portugal. The transaction was conditionally cleared by the Commission under the European Union Merger Regulation (the "EUMR") on 20 April 2015, subject to the divestment of Altice's businesses in Portugal at the time. In May 2017, two years after the Commission's clearance of the transaction, the Commission sent a Statement of Objections to Altice alleging that Altice had implemented its acquisition of PT Portugal before obtaining the Commission's clearance, and in some instances, even before its notification of the merger. In particular, the Commission concluded that:
- Altice had acquired the legal right to exercise decisive influence over PT Portugal, for example by granting Altice veto rights over decisions concerning PT Portugal's ordinary business; and
- that in certain cases, Altice had actually exercised decisive influence over aspects of PT Portugal's business, for example by giving PT Portugal instructions on how to carry out a marketing campaign and by seeking and receiving detailed commercially sensitive information about PT Portugal outside the framework of confidentiality arrangements.
Under the EUMR rules, in order to prevent the potentially irreparable negative impact of transactions on the market, merging companies are required to notify planned mergers of Union dimension for review by the Commission ("the notification requirement") and not to implement them until they are cleared by the Commission ("the standstill obligation"). Companies that breach these obligations, whether intentionally or negligently, can be imposed fines of up to 10% of their aggregate turnover.
In the past few years, there have been a number of cases/decisions relating to the EU merger procedural rules. For example:
- in July 2014, the European Court of Justice upheld a €20 million fine on Electrabel for failing to notify to the Commission its acquisition of a minority shareholding and completing the deal without prior clearance from the Commission (C-84/13 P Electrabel v Commission);
- in May 2017, the Commission fined Facebook €110 million for providing incorrect or misleading information during the merger investigation of Facebook's acquisition of WhatsApp;
- ongoing Commission investigations into the allegations that Merck and SigmaAldrich, General Electric and Canon provided incorrect or misleading information to the Commission as part of the EUMR review process or implemented a merger before notification to and clearance by the Commission;
- in October 2017, the General Court has handed down its judgment to reject an appeal by Marine Harvest against fine for gun-jumping (Case T-704/14 Marine Harvest ASA v Commission), and another case on gun-jumping is pending at the European Court of Justice (Case C-633/16 Ernst & Young P/S v Koncurrencerådet).
These cases should act as clear reminders to companies planning mergers or acquisitions that a strict adherence to the EUMR procedural rules is essential, and that the infringement of those rules are taken extremely seriously by the Commission (even where merger clearance has been granted and some time has passed since) with potentially severe consequences.
With thanks to Akihiro Kudo of Ashurst for his contribution.
