Gun-jumping can occur when parties fail to fulfil the two obligations laid down by the European Merger Regulation No 139/2004 (EUMR). Article 4(1) of the EUMR sets out the obligation to notify the European Commission (Commission) of a concentration with an EU dimension before implementation. Article 7(1) sets out the obligation to stand still until the Commission declares such a concentration compatible with the internal market.
But would it be possible for parties to breach both obligations concurrently regarding the same transaction and thus to be fined doubly? The General Court answered in the affirmative in one of the most anticipated anti-gun-jumping cases.
On September 22, 2021, the General Court of the European Union upheld the decision of April 24, 2018 (contested decision) by the Commission, which imposes two fines on Altice for infringing Article 4(1) and Article 7(1) of the European Merger Regulation No 139/2004 (EUMR). This note considers the potential implications after the GC’s judgment.
Altice is a multinational cable and telecommunications company based in the Netherlands. PT Portugal is a telecommunications and multimedia operator with activities in Portugal.
The chronology of the main procedural steps relating to Altice’s notification to the Commission and in the run-up to the contested decision is as follows:
- On October 31, 2014, Altice contacted the Commission to inform it of its plan to acquire sole control of PT Portugal.
- On December 9, 2014, Altice entered into a share purchase agreement (SPA) with PT Portugal.
- On February 25 2015, Altice formally notified the transaction to the Commission.
- On April 20, 2015, the Commission adopted a decision by declaring the operation compatible with the internal market subject to compliance with the commitments annexed to that decision.
- On June 2, 2015, Altice publicly announced that the transaction had been completed and that ownership of the shares in PT Portugal had been transferred to it.
- Between April 2015 and August 2016, the Commission sent Altice five separate requests for information.
- On April 24, 2018, the Commission adopted a decision (i.e. the contested decision).
In the contested decision, the Commission concluded that Altice had implemented the transaction before notification of the concentration, in breach of Article 4(1). It further concluded that Altice had implemented the SPA before the Commission’s clearance of the concentration, in breach of Article 7(1). On 5 July 2018, Altice appealed this contested decision.
The General Court judgment
Altice put forward five pleas in law before the General Court. In particular, it argued that the pre-closing covenants contained in the SPA were ancillary and did not amount to early implementation of the concentration and that the imposition of a second fine on the same person for the same conduct as already penalised by another legal provision protecting the same legal interest infringes the principle ne bis in idem, the principle of proportionality.
The General Court rejected Altice’s arguments. It held that the SPA’s pre-closing covenants afforded Altice the possibility of exercising decisive influence as from its signing and that decisive influence was exercised on certain aspects of PT Portugal’s business before the closing of the transaction, meaning that Altice had implemented the SPA before the Commission declared the transaction compatible with the internal market. Instances referred to in the contested decision which the General Court found capable of amounting to an implementation of the SPA include Altice’s exercising its influence over the appointment of PT Portugal’s senior management staff, PT Portugal’s pricing policies and PT Portugal’s entering into, terminating or modifying contracts.
The General Court also held that the information exchanges that had taken place between Altice’s directors and those of PT Portugal on the former’s initiative contributed to demonstrating that Altice had exercised decisive influence over certain aspects of PT Portugal’s business.
Furthermore, the General Court rejected Altice’s argument concerning the principle of proportionality. It stated that Article 4(1) lays down an obligation to act, consisting of the obligation to notify the concentration before its implementation whereas Article 7(1) lays down an obligation to act, namely not to implement the concentration before its notification or authorisation. It further argued that while an infringement of Article 4(1) automatically results in an infringement of Article 7(1), the converse is not true.
Accordingly, the General Court stated that the imposition of two penalties for the same conduct by the same authority in a single decision cannot be considered, as such, to be contrary to the principle of proportionality, as seen in the judgment of Marine Harvest v Commission (T-704/14).
Finally, the General Court considered the fines imposed on Altice in terms of the nature, gravity and duration of the infringements and ruled that they were lawful and proportionate. However, the General Court granted a reduction of 10% to the fine on the ground that Altice had proactively contacted the Commission about the transaction.
The General Court’s ruling is a good reminder that parties involved in a transaction must remain separate and independent until clearance. The parties should be aware that certain types of conduct such as discussions regarding post-merger implementation planning and information exchanges can constitute gun-jumping. This ruling demonstrates that the Commission is willing to take a more stringent interpretation of the two obligations.