Competition authorities worldwide are increasingly penalising undertakings engaging in “gun-jumping” in an effort to deter early, unlawful implementation of transactions requiring prior merger control approval.
“Gun-jumping” occurs where an undertaking fails to notify a notifiable transaction before implementation, or where an undertaking notifies a transaction to the relevant competition authorities but begins to implement (“put into effect”) the transaction before clearance has been issued. In Ireland, “gun-jumping” is prohibited under section 19 of the Competition Act 2002 - 2014 (the “Act”). Under the Act, early implementation of a notifiable transaction renders the transaction void as a matter of Irish law and is a breach of statutory duty. It is important to note that the Act prohibits “gun-jumping” before media merger clearance (where applicable) as well as “gun-jumping” before competition clearance.
In November 2016, the French Competition Authority (the “FCA”) fined the Altice Group (through its subsidiary Numericable) €80 million for the improper implementation before clearance of its acquisitions of SFR and OTL / Virgin Mobile. This is the highest ever fine levied for “gun-jumping”. Previous high-profile “gun-jumping” fines include the German Competition Authority’s €4.5m fine of Mars and the two separate €20m fines levied by the European Commission on Electrabel and Marine Harvest.
In the Altice merger, two notifiable separate mergers took place in 2014. Both were notified to the FCA and subsequently cleared. However, in April 2015 following tip-offs from competitors that Altice and SFR and OTL had failed to act as independent competitors in the period between signing and closing, the FCA carried out dawn raids at the premises of the purchaser and targets. Following an investigation, the FCA held that the parties had improperly implemented the transaction prior to obtaining merger clearance from the FCA.
This judgment raises the issue of what constitutes implementation of a transaction as distinct from the acquirer taking measures to preserve the value of a target in the interim period between the execution of a definitive agreement and the closing of the transaction. This judgment shows that a distinction must be drawn between (i) information exchanges to plan for implementation; and (ii) actual implementation that amounts to co-ordination of behaviour.
To date, the Irish competition body, the Competition and Consumer Protection Commission (the “CCPC”) and the Minister responsible for media merger clearance have not taken an aggressive stance against “gun-jumping”, tending to allow late notification of a merger (where there are no competition concerns) and not to take any enforcement action against those responsible for implementation before clearance. However, given the increased enforcement activity in Europe against “gun-jumping”, businesses with Irish merger control obligations would be well-advised to set up “clean-teams” to facilitate information exchange and to plan for implementation in the interim period between signing and competition clearance being granted.
The Altice decision acts as a cautionary tale to businesses with Irish merger control obligations that competition authorities are taking the issue of “gun-jumping” seriously. Parties must continue to ensure that notifiable transactions are notified to the relevant regulators; and that the merging parties continue to act as independent competitors; and do not “put into effect” the transaction prior to clearance being granted.