The European Commission’s
€125 million fine to Altice signals a fiercer gun-jumping
enforcement regime. Companies need to exercise more caution in
the actions they take between signing the contract and the
completion of the deal. But the rules are unclear and
enforcement will be largely taken on a case-by-case basis,
meaning companies are left in state of confusion as to what
actions to take.
The Commission fined Dutch
telecoms company Altice €124.5 million ($148.4 million) in
April for taking control of PT Portugal before it gained
approval from relevant authorities, which it said had
undermined the functions of the EU merger control system.
Altice plans to appeal the decision, saying in a statement that
the case differs entirely from the SFR/Virgin case, in which
Altice was fined €80 million in 2016 for taking control of
the businesses before approval, a case it decided not to
challenge. The Commission’s move is believed to
signal a further step-up in enforcement, after
Canon’s acquisition of Toshiba, and EY and
KPMG’s planned merger.
"There does seem to have
been a step-up in enforcement, even where transactions
do not necessarily give rise to competition
Herbert Smith Freehills competition partner André
Pretorius said there has certainly been an increase in
enforcement and a number of recent cases have addressed issues
that had not been the subject of infringement decisions
"There does seem to have been a step-up in
enforcement of the procedural rules, even where transactions do
not necessarily give rise to substantive competition concerns,"
Four years ago, the Financial Conduct
Authority said there had been an excessive amount of strategic
information shared before the transaction was properly cleared.
It also said Altice interfered in SFR’s pricing
policy; its prior approval of SFR’s involvement in
a tender offer; interfered in SFR’s offer using
Numericable’s box, TV channel network and
requested approval to renegotiate a prior agreement with
The decision this year seems to broaden
the regulators’ scope, so much so that some of the
reasons for the penalty did not amount to Altice clearly acting
in an uncompetitive manner. The Commission noted that
provisions of the purchase agreement resulted in Altice
acquiring the legal right to exercise decisive influence over
PT Portugal; this without reference to an explicit act of
decisive influence. The Commission also said Altice provided PT
Portugal with instructions on how to conduct a marketing
campaign and received commercially sensitive information
outside the framework of any confidentiality agreement.
Pretorius believes companies do not need
to do anything new after this case, only pay closer attention
to existing rules. "Recent cases have highlighted these issues,
but they have not changed the law," he said. "Parties will
always need to assess carefully whether to notify and ensure
that transaction documents deal appropriately with conduct of
business between signing and completion".
- The European
Commission’s recent Altice gun-jumping decision
signals stricter enforcement of the rules;
- Companies do not
necessarily need to do anything differently from before, but
they need to exercise more caution and be wary that actions
that do not amount to uncompetitive action could be
- Because the rules are
currently unclear and require more guidance, companies must
provide very clear guidelines that indicate what is
acceptable between signing the contract and
The Advocate General’s
opinion in the EY/KPMG case revealed actions that would not
breach the stand-still obligation, the requirement for merging
companies to suspend a concentration and wait until clearance
is obtained. In the case, KPMG DK terminated its membership
agreement with KPMG when the merger with EY was announced in
November 2013, before it had gained clearance from the Danish
Competition and Consumer Authority. Advocate general Nils Wahl
said the obligation does not affect measures which, although
taken in connection with the process leading to a
concentration, precede and are severable from measures actually
leading to the acquisition of the target undertaking.
Pretorius said one of the most significant
challenges is in facilitating the appropriate sharing of
information between the target and buyer before completion.
"You may need to have proper clean team
arrangements to regulate the information passed to the buyer
and the use of that information during pre-completion
integration planning," he said.
If two competing trade players want to
merge and information is sensitive, they create a clean team to
minimise the information passed on. But for smaller companies,
this could be problematic.
Philippe Chappatte, partner and head of
the competition group at
Slaughter and May said that the rules are unclear and
people in the Commission are reluctant to provide publishing
guidelines until they have experience in dealing with specific
"Companies need to establish very clear
guidelines that communicate internally what actions are allowed
between signing the contract and completion," he said.
Buyers want to gain maximum confidence in
the deal and as much information that they can get about the
target company. The target does not want to disclose
confidential information until the deal goes through. Marrying
these two desires is, according to Chappatte, the major
challenge and complimenting these while complying with unclear
gun-jumping rules is not easy.
"Implementing the rules requires many
judgement calls and these can alter as you get closerto
completion," he said.
But the main areas of focus remain the
same as before the latest Altice case. Companies must prepare
for a merger but cannot implement it and must not share
confidential information, other than to clean teams. But
companies must be wary that actions not giving rise to
uncompetitive action could still be penalised.
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