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Gun jumping in mergers: An overview of EU and national case law


This article provides an overview of gun jumping enforcement by the courts and the competition authorities in 2020 and 2021. After specular sanctions in the past years [1], defining a clear dissuasive policy against any infringement of merger control rules, 2020 and 2021 confirmed the stringent approach of the authorities. One important finding is the increase of the number of cases which penalized gun jumping. It was also observed that authorities, not bound by time barred constraints, don’t hesitate to pursue “cold cases” [2].

Nevertheless, reducing the 2020 and 2021 developments to the confirmation and detail of the pre-existing framework would provide an incomplete picture. The enforcers have also decided to extend their playing field, or at least to take full advantage of their existing powers, as illustrated by the Illumina/Grail case. The future European Courts rulings challenging the recent decisions will be key to follow.

What is gun jumping?

Gun jumping is prohibited under the EU and many national merger control rules and encompasses two situations: the violation of the notification obligation and the violation of the standstill obligation

In the vast majority of jurisdictions in the world, merger controls impose a mandatory notification process when (1) the transaction qualifies as a concentration and (2) the local thresholds are met. By way of example, this “notification obligation” is established in Article 4(1) of the EUMR and Section 7(A) of the Clayton Act and HSR Act. In concrete terms, a failure to file the transaction is gun jumping.

Then, as soon as the parties determine that their transaction is reportable before a competition authority, they have to abide with a “standstill obligation” which requires them not to complete the transaction until its formal approval by the relevant competition authorities or the expiry of the review deadline [3]. Under the EUMR, the article 7(1) defines this standstill obligation. An infringement to this obligation is also considered as gun jumping. It covers two situations: (i) either the transaction is closed by the parties before the clearance, or (ii) the acquirer exercises some rights on target’s decisions as provided by the merger agreements and consequently influences the target’s decisions even before the closing of the transaction.

Over the past decade, the authorities set out the principles to enable the parties to prepare their integration while avoiding early implementation of the transaction, especially discussing the provisions to be included in the merger agreements [4]. Furthermore, measures were identified to secure allowed exchange of information between the parties between signing and closing (through the implementation of “Clean Teams” [5]). The developments below show that in 2021, the European Courts clarified the good practices in that respect.

1. The clarifications of the European Courts as regards the qualification and the sanction of gun jumping: the Marine Harvest and Altice cases

Altice remains an emblematic case in Europe where the Commission and the French Competition Authority have designed their stringent approach. As a reminder, Altice signed a Sale and Purchase Agreement (SPA) in December 2014 for the acquisition of PT Telecom. It was conditionally cleared by the Commission in April 2015. In March 2016, the Commission initiated a gun jumping investigation against Altice, alleging a violation of the standstill obligation laid down in the article 7(1) of the Regulation 139/2004 and an infringement to the obligation to file an acquisition laid down in article 4(1) of the same Regulation. By a decision of April 2018, the Commission penalized Altice and imposed two separate fines: 62 250 000€ for infringement to the obligation to notify and 62 650 000 € for failure to comply with the standstill obligation. Altice brought an action for annulment before the European General Court (GC).

The GC Altice judgment  [6] upholds the ECJ Marine Harvest decision [7] on gun jumping sanctions.

It is established practice that applying two sanctions for a same practice of gun jumping is legally grounded. In its Marine Harvest decision of March 2020, the European Court of Justice (ECJ) first said that sanctioning the same practice for violation of two provisions of the EUMR was not opposed to the proportionality and non bis in idem fundamental principles. Non bis in idem is, as recalled by the ECJ, the sanction of the same facts in two separate decisions at different times, the earlier decision being no longer challengeable [8]. By definition, this is irrelevant when a decision sanctions gun jumping under article 4(1) and 7(1) of the EUMR.

Then, the ECJ clarified that an early implementation is de facto an infringement to both obligations [9]. Despite the fact that the EUMR 139/2004 does not prescribe two distinct provisions for the notification and suspension obligations, as opposed to the former EUMR 4064/89, the obligations are twofold: an obligation to do (to file) and an obligation not to do (not to close) [10].

The GC Altice judgment of September 2021 confirms that the two obligations follow autonomous objectives [11], are therefore not “redundant”, and justify separate sanctions.

The GC Altice judgment clarifies the events triggering an early implementation

In the case examined by the GC, the SPA conferred the possibility to the acquirer to exercise a decisive influence on the target thanks to a list of pre-closing covenants of immediate application. As such, the mere possibility to influence the target’s decisions before the clearance, and the closing, of the transaction qualifies a violation of the standstill obligation. In other words, depending on the drafting and entry into force of some SPA provisions, the signing of the SPA can constitute an instantaneous infringement of article 4(1) of the EUMR [12]. In addition, and in the specific context of the Altice transaction, the GC confirmed the Commission conclusion that the acquirer did exercise its rights and adopted decisions with a decisive influence on the strategy of PT Portugal, leading to a change, even in part, of the control over the strategic commercial conditions of the target [13].

The GC Altice judgment clarifies the decisions that constitute an early implementation

As regards the mechanism enabling the intervention of the acquirer before the closing, “having a right to oversee the personnel of a target may be justified in order to preserve the value of the business between signing of the transaction agreement and closing, for example, for certain key employees who are integral to the value of the business, or in order to prevent changes to the cost base of the business [14]. However, having a veto right over the same topics goes beyond the allowed preservation of the target’s value. Furthermore, in the Altice case, the non-compliance with the required acquirer’s written consent on commercial decisions was subject to penalty to be paid by the target. In the GC view, it showed that the mechanism was not a consultation but indeed a veto right [15].

As regards the pre-closing covenants, the GC usefully recalled that covenants which preserve the target’s value, but also the integrity of its commercial activities [16] and its image and reputation [17] could legitimate the prior consultation of the acquirer between signing and closing without leading to an early implementation of the transaction. Nevertheless, commercial integrity or image justifications have to be assessed on the basis of the “circumstances” of the case.

Conversely, some pre-closing covenants should be avoided. In this case, the SPA conferred the acquirer the possibility to object any modification of the commercial conditions and prices to any clients. The acquirer’s written consent was indeed not limited to a clear scope of commercial decisions but was covering every commercial decision [18].

Consequently, the matters subject to Altice written consent were so numerous, broad and the thresholds low that the GC said it exceeded the need to preserve the value of the target [19]. In addition, the SPA was understood by the target as a request to ask for the prior approval of Altice even for matters which were part of the normal course of business.

Among the other practical takeaways of the judgement, it is interesting to note that the SPA drafts were examined as regards the evolution of the thresholds to better understand the intention of the parties. The first drafts showed much higher thresholds than the ones finally included in the SPA provisions [20], in line with the Commission findings of broad intervention of the acquirer.

The Altice GC judgment clarifies the exchange of sensitive information between the parties

The GC positively reminds that “sharing competitively sensitive information on commercial matters with the buyer might be considered as, if properly conducted, a normal part of the acquisition process, if the nature and purpose of such exchanges are directly related to the potential acquirer’s need to assess the value of the business [21].

However, in the Altice case, the parties continued to exchange information after the signing of the SPA, and the information were highly sensitive [22] especially considering that the parties were competitors. Moreover, the said information was shared with a large group out of any “clean team” process.

The GC concluded that the exchange of sensitive information contributed to demonstrate that the applicant had exercised decisive influence over certain aspects of the target’s activities [23].

2. The national enforcement trends

The quantitative enforcement: the example of China

Gun jumping decisions are not new in China. The authority, SAMR, had repeatedly acted against any violation of the merger control rules. But 2021 showed a significant increase of the implementation of the law. Through five waves [24], starting in March 2021 and ending in December 2021, more than 60 decisions were adopted to penalize the failure to notify acquisitions in violation of the article 21 of the Chinese Antimonopoly Law (AML).

The first waves focused on the internet sector, pursuing Chinese internet giants [25] with VIE structures involving offshores holdings. Between November and December 2021, SAMR’s decisions covered digital and IT businesses but retail, transportation services or banking activities as well [26].

Considering the characteristics of the transactions, acquisitions of sole and joint controls were fined. Several decisions involved the creation of joint ventures with no pre-existing activity (and business permit obtained after the completion of the transaction), but still subject to a mandatory filing as soon as the jointly acquirers each meet the thresholds. Interestingly, many acquisitions of a minority stake in a Chinese business have been penalized. This conveys a message to all stakeholders, and especially funds and consortium of investors, to recall that acquiring a minority stake can provide the shareholder with a control over the target, and better is to double check the application of the AML to each acquisition.

In terms of procedure, the assessment of the gun jumping infringement did not take long to the authority: the majority of the cases were analyzed in 3 to 4 months, and up to 7 and 8 months for less than five cases [27] . The amount of fines is frequently up to the maximum allowed by the AML: CNY 500 000 for each of the controlling entity violating the notification obligation. A review of the AML is pending and proposes a significant increase of the fines for gun jumping (up to 10% of the controlling company turnover). The definition of control would also be clarified in the new law, close to the EU rules [28] .

Importantly, SAMR is not bound by a time-limit when initiating an investigation. Some of the transactions pursued and sanctioned were signed and completed back to 2012 [29].

The substantive enforcement

1. Gun jumping and acquisition of control

Italy. In May 2020, Acea, Mediteranea Energia and Alma CIS submitted to the Italian Competition Authority, the AGCM, the acquisition of joint control over Pescara Distribuzione Gas, resulting from the signing of merger agreements in March 2019. In the same notification, the parties filed the acquisition of Alto Sandro Distribuzione Gas, considering that the transactions were part of the Acea global expansion strategy and were therefore interconnected.

However, the AGCM raised that nothing in the agreements established that a transaction was conditional on the other. Moreover, at the time of completing the first acquisition, the conclusion of the second one was remaining a mere possibility rather than a certainty. Referring to the European rules and case law, a discussion was engaged between the AGCM and the acquirer to determine whether the parties were legitimate to raise the benefit of equivalent treatment as the one provided by the Article 5(2) of the EUMR Regulation. This article lays down an exception for filing when two mergers put in place by the same entities over a two-year period constitute a single transaction. When these conditions are fulfilled, the notification of the latest merger is also a valid notification of the earlier merger. In this case, the AGCM did not consider that transactions were connected to each other. Consequently, in September 2020, Acea, and in a more limited proportion, Mediteranea Energia and Alma, were sanctioned for violation of the notification obligation in relation to the joint control over Pescara and cumulatively fined up to 153 k€ [30].

Poland. By a decision of September 2020, the Polish Competition Authority, the UOKiK, sanctioned Amerigas Polska for failure to notify the acquisition of Centrum Dystrybucji Gazu (CDG) [31]. The control was conferred by a pledge agreement on the CDG shares. According to the Polish law, such agreement does not require the consent of UOKiK, provided that the entrepreneur does not exercise the rights attached to these shares (except for the right to sell them). In this case, AmeriGas blocked the sale of some CGD assets, and de facto exercised its rights. The UOKiK also considered that Amerigas Polska did act in full awareness and failed to file intentionally and penalized for PLN 0,85 M (approx. 0,19 M€).

Hungary. In September 2020 [32], the Hungarian competition authority, the GVH, sanctioned Hiventures and another fund for failure to notify the acquisition of Talentuno, a firm specialized in employment placement, arguing that the acquisition of a temporary control over a target, limited to one year, was not subject to notification under the Hungarian rules. However, the authority considered that instead of a temporary control, the parties have indeed influenced the decisions and strategy of the target, especially in participating to significant modification to the target’s business plan.

2. Gun jumping and merger control procedure

The failure to file when the thresholds are met remains the most common reason for sanctioning gun jumping. Welcoming the full cooperation of the parties, several authorities agreed to negotiate a settlement, like the Austrian competition authority in the Facebook / Giphy case [33]. Facebook was fined for an amount of € 9,6M. Settlements were also negotiated in Portugal where the authorities issued two decisions in October 2021 with fines of € 60K and € 35K [34].

Failure to file repeatedly was also sanctioned, like the Indonesian decisions [35] in 2021

Then, respect of the thresholds and of the merger standstill obligation also attracted specific interest in Spain and in the US.

Spain. In May 2021 [36], The Spanish competition authority, the CNMC, pronounced a sanction against Funespana (a Mapfre entity) for the failure to notify its acquisition of Alianza Canaria in the funeral home sector. The market shares threshold was met when considering a local geographical market (the retail market of chapel of rest services in the town of San Bartolomé de Tirajana ). The parties were considered as negligent when assessing the thresholds and the CNMC claimed that they should have used the voluntary process to consult the authority in order to determine whether the transaction was reportable. The CNMC imposed a fine of € 0,1 M on the acquirer.

In the same sector, in July 2021 [37], Albia was sanctioned for failure to notify its acquisition of Tanatorios Mostoles in the Madrid region. As opposed to the above procedure, the parties voluntary contacted the CNMC to inform it of the deal but did not notify the transaction, considering that the market shares thresholds were not met. The parties were arguing that 35% of the funeral services were concerning deceased people from outside the said municipality but did not convince the authority on the market shares to be considered to appraise the market shares thresholds.

The US. Recent developments of the US administration enforcement are twofold [38]. Instead of a simplified notification form as known in Europe, the US rules had organized an early implementation process when the transactions filed under the HSR were not rising any competition issues. This enabled the parties to complete a transaction before the end of the 30-days period of the HSR assessment. In February 2021, the US administration has decided to suspend temporarily this possibility, re-assessing the mechanism.

Then, the specificities of the US regime allows the administration to maintain an investigation opened when the merger control rules have been respected by the parties and the deadlines have expired, which normally mean that the parties are allowed to complete their transaction if the latter is not challenged to the Court [39]. To enable the antitrust agencies to pursue their work and have a final decision or “opinion” on a case that can be enforceable, the FTC announced in August 2021 that it has started issuing “pre-consummation warning letters” informing the parties that, despite their right to do so, they can complete their transaction but “at their own peril”.

Such situations lead to important legal uncertainty for the undertakings, as highlighted in 2021 with the Illumina/Grail case, developed in part 3 below.

3. Gun jumping and early implementation

Czech Republic. After CSG Industry notified the acquisition of six car retailers in Czech Republic, the Czech competition authority, UOHS, cleared the transaction in October 2020. However, during its review it found that CSG did implement a control over the targets back to February 2019, especially through the nomination of executives. By a decision of July 2021 [40], the acquirer was fined up to CZK 4,5M, according to a settlement procedure.

This sanction intervenes a few months after CSG was penalized for an early implementation of the acquisition of Skyport [41], active in ground-handling services sector and air catering services. The decision also sanctioned the appointment of the executive and supervisory board members before the clearance of the transaction by the UOHS.

Portugal. In 2019, Fidelidade notified the acquisition of Saudeinvest Fund to the AdC, which found that the acquirer already took the control over the target back in 2018, especially through the nomination of the management of the Fund. When the AdC decided to open a phase 2 to assess the merger into more details, Fidelidade decided to abandon the transaction, and restored the previous management. However, the AdC maintained the gun jumping procedure to land to a sanction of € 0,3M in August 2021 [42]. Fidelidade has appealed the decision.

4. Gun jumping prohibition for individuals

In September 2021 [43], the US DoJ announced the fining of Richard Fairbank, CEO of the Wall Street bank Capital One Financial. In this case, three violations were identified in relation to his multi-million dollar compensation package. In 1999 and 2004, Mr. Fairbank failed to file the acquisition of voting securities which value exceeded the HSR threshold. At that time, the FTC did not sanction him, as a monitoring system was supposed to be implemented. However, in 2018, the value of the veto securities acquisition met the thresholds again and the filing was not submitted before the completion of the acquisition. The FTC proposed to the DoJ to enter a settlement agreement and Mr. Fairbank accepted to pay USD 637 950 civil penalty to resolve the lawsuit.

3. A new approach : gun jumping in the absence of “initial” violation of the notification and standstill obligations

As described above, gun jumping is a violation of the obligation to notify a transaction and/or to suspend the completion of the transaction. By definition, such situations should arise when the notification is mandatory, and when the thresholds are met.

However, some regimes lay down specific provisions which enable the relevant competition authority to intervene out of such a context. The said provisions are not necessarily new, but the authorities now don’t hesitate to call for their application. Two cases present a specific interest here, Illumina/Grail in both its EU and US aspects and Facebook/Giphy in the UK.

The Illumina / Grail case is for sure a key event of 2021 on many aspects. The USD 7,1 billion transaction was announced in September 2020. It consists in the acquisition of Grail, developer and owner of a technology in early detection of multi-cancer through a DNA sequencing, by Illumina the sole provider of DNA sequencing in the US that can be used for testing such technology. The transaction was not reportable to the Commission nor to a national authority.

However, the Commission obtained jurisdiction in April 2021 [44] after France, Belgium, the Netherlands, Greece, Iceland and Norway referred the case under the Article 22 of the EUMR, as suggested by the Commission in autumn 2020 to prevent killer acquisitions [45]. The Article 22 of the EUMR allows one or several Member States to refer a transaction to the Commission when neither the European nor the national merger control thresholds are met.

Illumina submitted its notification to the Commission in June 2021. Nevertheless, despite the imminent opening of the phase II, Illumina decided to complete the transaction in July 2021, apparently to comply with the deadlines established by the SPA provisions. Illumina announced however that it would maintain the business separated until the end of the Commission review.

Facing the closing while its review was still ongoing, in October 2021 [46], the Commission fined Illumina for violation of article 7(1) of the EUMR and adopted interim measures to “restore and maintain the conditions of effective competition” on the market.

In particular, the interim measures adopted provide that:

  • Grail shall be kept separate from Illumina and be run by an independent Hold Separate Manager, exclusively in the interest of Grail (and not of Illumina).
  • Illumina and Grail are prohibited from sharing confidential business information, except where the disclosure is required to comply with the law or in line with the ordinary course of their supplier-customer relationship.
  • Illumina has the obligation to finance additional funds necessary for the operation and development of GRAIL.
  • The business interactions between the parties shall be undertaken at arm’s length, in line with industry practice, hence without unduly favoring Grail to the detriment of its competitors.
  • Grail shall actively work on alternative options to the transaction to prepare for the possible scenario in which the deal would have to be undone in case the Commission were to declare the transaction incompatible with the internal market.

Illumina has appealed this decision to the European GC, which does not prevent Illumina and the Commission to reach an agreement on commitments to clear the deal.

On the other side of the Atlantic, the US FTC sued Illumina and was about to adopt an order to keep the company separated for the duration of the litigation but suspended its process when the Commission opened a phase II and engaged into a gun jumping penalty against Illumina [47]. Following the completion of the transaction, the US authority re-opened the litigation.

Future intervention of the European Courts are expected to provide a clear framework on the way the companies should now consider the merger controls impacts, especially for multi-national transactions, when no thresholds are met.

Another example of gun jumping in the absence of a violation of the merger control rules comes from the UK. The UK merger control presents a voluntary process. However, when the CMA is empowered to open an investigation against a transaction not notified, and then has the possibility to adopt an “Initial Enforcement Order”, a sort of “individual” standstill obligation.

In the Facebook/Giphy case, after the completion of the deal in May 2020, the CMA opened an investigation and pronounced an Initial Enforcement Orders (IEO) in June 2020 [48] to prevent merging companies from integrating in a way that might affect the CMA’s work. To monitor the IEO, periodic updates on this form of “hold separate” situation in a context where the integration has occurred yet, were due to the CMA and apparently not respected by the parties despite the warning given to Facebook. As a result, the CMA has issued in October 2021 a fine of GBP 50m for this ’major breach’ [49]

After the Facebook (now Meta) appeal against the IEO being dismissed by the Court in November 2020, the CMA opened a phase 1 merger control review in January 2021, raised horizontal and vertical concerns and then opened a phase 2 in April 2021. Remedies were discussed to solve alleged negative effects of the transaction on the UK markets, especially an open access to competitors to the Giphy’s GIF-sign library, a partial divestiture of Giphy limited to the UK territory, to be eventually rejected by the CMA. Finally, the CMA has requested Facebook to reconstitute Giphy in its status pre-acquisition and asked for its divestment, position which has no precedent in the UK. Thus, on November 2021 [50], the CMA ordered Facebook/Meta to sell Giphy. An appeal is pending before the UK Courts.

To conclude, in the light of the above, merger review is becoming more unpredictable for the parties, which will require rapid answers from the Courts and an update of the applicable legal framework to confirm that growth and mergers do not, by themselves, harm competition.

Note from the Editors: although the e-Competitions editors are doing their best to build a comprehensive set of the leading EU and national antitrust cases, the completeness of the database cannot be guaranteed. The present foreword seeks to provide readers with a view of the existing trends based primarily on cases reported in e-Competitions. Readers are welcome to bring any other relevant cases to the attention of the editors

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Kélig Bloret Dupuis, Gun jumping in mergers: An overview of EU and national case law, 21 April 2022, e-Competitions Gun jumping, Art. N° 105993

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