By a decision not yet published, issued on November 8, 2016 by the French Competition Authority (hereafter the “Adlc”) and described by the latter as the “first in Europe and in the world”, the Adlc imposed a joint fine of €80 million on Altice Luxembourg and SFR Group for having completed early two mergers prior to their authorization.
This is the first decision in France where the early completion of a merger is sanctioned by the Adlc, whose previous sanctions previously concerned failures to notify a notifiable transaction. While the sanction for failure to notify a merger is intended to punish companies that have failed to formally notify their transactions to the Adlc, the sanction for early completion is incurred when although the parties notify the transaction to the Adlc, they do not wait for its authorization and no longer act on the market as competitors but rather as a unique entity. Early completion can result from a transfer, prior to the authorization, of asset ownership, or more subtly, in the future purchaser exercising a determining influence on the target.
In the case at hand, while the two purchases in question (notably, the acquisition of exclusive control by the Altice Group on the SFR Group and the OTL Group) had already been notified and authorized by the Adlc for several months, the competing operators provided the Adlc with indications revealing the effective completion of these acquisitions even before their authorization. Adlc then carried out search and seizure operations in the premises of Numericable (a subsidiary of the Altice Group), SFR and OTL.
The Adlc’s investigation showed that before obtaining its authorization, Altice had acquired its targets notably bybehaving as follows:
- Altice intervened in the operational management of SFR and OTL by validating strategic decisions such as for example the renegotiation of a major agreement on mobile network sharing with Bouygues Télécom or the close coordination between SFR and Altice during the takeover of the OTL Group initially intended by SFR but which was finally completed by Altice following communication by SFR’s CEO of the tender price proposed by his company to Altice’s president.
- Altice and SFR coordinated their strategy during the period of suspension until the authorization by preparing the launch of a new range of internet access offers which was thus able to take place a few days only after the authorization of the merger and which marked an important change in SFR’s broadband strategy.
- The senior management of Altice and SFR exchanged a large amount of confidential strategic information on individualized data and with regard to SFR’s recent and foreseeable future business performance. Likewise, concerning OTL, Altice accessed weekly feedbacks of commercially sensitive information on OTL’s economic performances.
All these elements allowed the Adlc to establish that Altice had exercised a determining influence on its targets before receiving authorization for these transactions. This led the Adlc to sanction not only the purchaser, Altice, but also the SFR Group and therefore the target as well.
This is a clear warning to all companies that might wish to anticipate the authorization of the Adlc or any other competition authority at the risk of being exposed to receiving a fine for any coordination of behavior on the market with the target before approval of the transaction.
It is also an opportunity to call for vigilance with respect to all commercially sensitive information that may be exchanged as part of a merger between competing operators without precautions being taken to frame them (clean team, etc.). Such exchanges may also expose the parties to sanctions for anti-competitive agreement, whether or not the transaction takes place.