Glossary of competition terms

This Glossary is based on definitions from DG COMP’s Glossary of terms used in EU competition policy (© European Union, 2002) and the OECD’s Glossary of industrial organisation economics and competition law (© OECD, 1993). Each term is enriched with references of national case laws from the e-Competitions Bulletin and Concurrences Review.

Gun jumping

The notification requirement is laid down in Article 4(1) of the Merger Regulation, which states that a concentration with a Union dimension must be notified prior to its implementation. It is complemented by the standstill obligation in Article 7(1) of the Merger Regulation, which prevents companies from implementing a concentration with a Union dimension until it has been declared compatible with the internal market by a Commission decision, or in the absence of a decision, by expiry of the legal deadline.

The notification requirement and the standstill obligation are cornerstones of the EU merger control system, as they enable the Commission to carry out ex ante control of all concentrations with a Union dimension. This prior scrutiny is a key safeguard that protects the structure of competition and ultimately consumers from any permanent and irreparable damage to effective competition that could emerge from an anti-competitive transaction. The importance of these provisions is confirmed by the fact that the Commission can impose a significant fine (up to 10% of the turnover of the undertakings concerned) in the event of an infringement of the notification requirement or the standstill obligation. A violation of the standstill obligation through early implementation of a transaction is also known as ’gun jumping’.

© European Commission

The expression “gun-jumping” has a wide connotation and includes pre-merger coordination between the merging parties. Gun-jumping can occur when the merging parties fail to observe mandatory pre-merger notification requirements (i.e. the situation discussed in the previous section) and/or fail to observe the waiting period requirements under applicable merger control laws, so that they execute the transaction after having filed it but before they have obtained the merger clearance. Gun-jumping has also substantive connotations, as it can entail an antitrust offence under the general competition provisions against anti-competitive agreements between competitors if the parties coordinate their competitive conduct prior to the actual consummation of the transaction.

Defining what constitutes an anti-competitive gun-jumping activity is a delicate exercise, since many forms of pre-merger coordination between the merging parties represent a reasonable and necessary collaboration during the merger negotiations. The due diligence process, for example, includes the exchange of a certain amount of information, and competition agencies recognise that due diligence is an essential part of any transaction.41 However, the parties to the merger should not act as a single business unit with the idea that the transaction will proceed even after the deal-closing documents are signed. The tendency of merging parties to align the incentives as soon as possible increases the risk of gun-jumping.

Examples of gun-jumping may include any of these activities taking place prior to the approval of the merger: (i) coordination between merging parties on prices or terms to be offered to customers, (ii) allocating customers for sales, (iii) coordination of negotiations with customers for sales to be made after the merger is approved (e.g., negotiations of long-term contracts); (iv) plans made regarding products, distributors or employees (e.g. the appointment of new directors), and in some cases, also (v) the exchange of detailed information concerning customers, prices, and product plans, despite the fact that this is often part of pre-closing due diligence.

© OECD

Glossary