The New Zealand Commerce Commission's (NZCC's) position towards gun jumping is that "while parties to proposed mergers must naturally engage with each other to explore the merits of a transaction prior to binding themselves and consummating a deal", pre-merger discussions and coordination concerns can arise if:
- the parties exchange competitively sensitive information through negotiations without appropriate protections in place, which may "be used to dampen continuing competition between them".(1) The NZCC's view is that:
Detailed knowledge of a competitor's pricing, costs, strategic plans and other core material can hamper the competitive dynamic that once prevailed, especially in markets where the parties to a proposed merger are each other's closest competitors or where the information exchanged can be used readily with long term anticompetitive consequences.
- the parties agree that "one party [will cede] control over pricing decisions" to the other, or reach "an agreement not to compete for each other's customers" in the period before completion. The NZCC's view is that "prior to completion of a merger, such conduct is effectively collusion".
The NZCC brought gun jumping proceedings in 2008. In that case, the High Court ordered that the merger parties pay penalties totalling NZ$100,000.(2)
Businesses contemplating an M&A transaction with their competitors must bear in mind the following competition law considerations:
- They must ensure that there are appropriate protections in place for the exchange of competitively sensitive information.
- They must ensure that until their transaction has been completed – and the merger parties become a single entity – the parties continue to operate as separate competitors.
This has important implications for structuring due diligence discussions, drafting pre-completion conduct of business and material adverse change clauses and undertaking pre-completion integration planning activities.
For further information on this topic please contact Troy Pilkington, Sarah Keene or Craig Shrive at Russell McVeagh by telephone (+64 9 367 8000) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Russell McVeagh website can be accessed at www.russellmcveagh.co.nz.
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