Gun-jumping: the French Competition Authority issues highest fine ever for premature engagement in post-M&A integration
By Valerio Cosimo Romano
On 8 November 2016 the French Competition Authority (FCA) imposed a whopping EUR 80 million fine on Altice Luxembourg and its subsidiary SFR Group for implementing two notified transactions before obtaining appropriate merger clearance.
In France, the effective implementation of a concentration is suspended until clearance by the FCA. Pending approval, the concerned parties must behave as competitors and not act as a single entity. Violation of the rule triggers the application of Section II of Article L. 430-8 of the Commercial Code, which provides for a fine of up to the 5 per cent of the notifying parties’ turnover.
In 2014, Altice and its subsidiary Numbericable had notified the Authority about two distinct concentrations: the acquisition of SFR and that of OTL. Both transactions were approved. However, in 2015 the Authority started suspecting an early implementation of the two transactions and raided the companies’ premises. Evidence showed that the behavior implemented by Altice led to the exercise of decisive influence on its targets and allowed the company to access strategic information before getting the green light from FCA.
More specifically, Altice had repeatedly validated a number of SFR’s strategic decisions such as pricing and promotional policy, the participation in a tender, the renegotiation of a contract and the joint preparation of an offer. Further, the two companies had exchanged a large amount of strategic information concerning performances and forecasts at a very senior level.
In the second case, Altice had been involved in the OTL’s operational management, had set up a mechanism which allowed access to commercially sensitive information, and had allowed the participation of OTL’s CEO in the group’s decision-making and periodic reporting of commercial performance.
In the past, the FCA had already fined companies for failing to notify or for breach of commitments, but this is the first case in which it ruled on the early implementation of a merger prior to authorization (so called gun-jumping). The fine is also the highest ever imposed for a gun-jumping offence, and is four times higher than the highest sanction registered in Europe to date. According to the FCA, the high amount of fine is justified by the importance of the acquisitions in terms of purchase price and the impact on the telecommunications industry, the breadth, duration, reiteration and deliberate nature of the conduct. Remarkably, the FCA added that in setting the amount of the sanction it had taken account of the fact that the companies had not questioned the circumstances behind the fine and their legal characterization.
This sanction confirms an increased global attention by competition agencies in challenging the practice of gun-jumping. It also denotes a shift in the enforcement leadership on the matter from U.S. to European competition authorities. On a more practical ground, the judgment contributes to shedding legal certainty on the behavior to be avoided in the no man’s land between antitrust notification and clearance. Also, it opens up the debate on how to immediately achieve all the synergies expected from M&A transactions without violating competition law.