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€125 million fine imposed on Altice for gun-jumping activity

  • United Kingdom
  • Competition, EU and Trade
  • Other

01-05-2018

On 24 April 2018, the European Commission (the “Commission”) imposed a €124.5 million fine on Altice, the multinational cable and telecommunications company based in the Netherlands, for ‘gun jumping’ by implementing its acquisition of the Portuguese telecommunications operator PT Portugal (“PT”) before notification or approval by the Commission.

The €124.5 million fine is the highest ever imposed by the Commission for gun jumping1 and significantly exceeds the €80 million fine handed down by the French competition authority – also on Altice – but in respect of two separate acquisitions that were cleared in France in 2014.

The latest fine is a clear indication that gun jumping continues to be high on the Commission’s enforcement agenda and is regarded as very serious competition infringement. It is a reminder that firms must give careful consideration to the need for merger filings, and implement appropriate processes to limit exchange of competitively sensitive information and integration of target businesses prior to merger clearance.

Background of the case

On 9 December 2014, Altice entered into a transaction agreement with Oi, the Brazilian telecommunications operator which controlled PT, to acquire sole control of PT. In February 2015, Altice notified the Commission of its plans to acquire PT. On 20 April 2015 the transaction was conditionally cleared by the Commission, subject to the divestment of Altice’s businesses in Portugal at the time.

In May 2017, the Commission addressed a Statement of Objections to Altice detailing its concerns that Altice implemented its acquisition of PT before obtaining the Commission’s clearance, and in some instances, even before its notification of the merger.

Gun-jumping offence

Gun-jumping refers to unlawful pre-merger coordination between parties involved in a merger or acquisition. Gun jumping occurs where the parties fail to observe mandatory pre-merger notification and clearance requirements (i.e., a breach of the notification requirement), and also where merging parties coordinate their competitive conduct prior to the completion of a transaction which has been notified but not yet cleared (i.e., a breach of the standstill obligation).

The Commission can impose fines of up to 10% of the aggregated turnover of companies which intentionally or negligently breach the notification and/or the standstill obligations. In setting the amount of the fine, the Commission takes into account the nature, gravity and duration of the infringement, as well as any mitigating and aggravating circumstances. National competition authorities have similar fining powers.

The Commission’s decision

In its press release issued on 24 April 2018, the Commission stated that it had drawn the following conclusions:

  • Certain provisions in the sale and purchase agreement meant that Altice acquired the legal right to exercise decisive influence over PT, for example by granting Altice veto rights over decisions concerning PT’s ordinary business.
  • Altice actually did exercise decisive over aspects of PT’s business, for example by giving PT instructions on how to carry out a marketing campaign. The Commission also found that Altice had sought and received detailed commercially sensitive information about PT outside the framework of any confidentiality agreement.

In light of the above, the Commission found that Altice had breached both the notification and the standstill obligations. Moreover, the Commission considered that Altice was aware of its obligations under the EUMR, meaning that its breach of its procedural obligations was at least negligent. On the basis of these factors, the Commission concluded that an overall fine of €124.5 million was both proportionate and appropriate as an effective deterrent.

Commenting on the fine, Commissioner Margrethe Vestager highlighted that the Commission considers gun-jumping to be serious because it undermines the effectiveness of the merger control system and reiterated that companies are expected to respect both the notification and standstill obligations.

Altice has announced that it will file an appeal against the Commission’s decision before the EU General Court to request that the decision as a whole be annulled or, at the very least, that the fine be significantly reduced.

Comment

Gun-jumping is a very serious infringement of competition law and is high on the Commission’s enforcement agenda. As the present case illustrates, gun-jumping can attract considerable fines and cause significant reputational damage to the culprit.

The key point is that the merging parties should continue to act as independent competitors prior to clearance – even on transactions that do not otherwise raise substantive competition issues. The target should continue to make its decisions independently and merging businesses should avoid transfers of personnel or influence exerted by the acquirer over the target’s management prior to clearance. Integration of customer-facing conduct (e.g., a joint marketing strategy) or exchanges of detailed information on individual clients or suppliers will be particularly problematic to a competition authority.

Best practice requires any exchange of competitive sensitive information to be limited to what is necessary to achieve the transaction and takes place subject to appropriate confidentiality agreements. Companies frequently use additional compliance tools such as “clean teams”, internal guidelines and IT access controls during the Transaction process.

Integration planning prior to clearance is permissible but only in respect of certain aspects of the acquired business and always subject to prior legal oversight.

 


1 Fines of €20 million were imposed on each of Marine Harvest in 2014 and on Electrabel in 2009.

 

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