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Gun Jumping – CERES – November 2018 OECD discussion


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This presentation by Charlesa CERES, Associate General Counsel, Antitrust & Competition Law at United Technologies Corporation, was made during the discussion “The Suspensory Effects of Merger Notifications and Gun Jumping” held at the 130th meeting of the OECD Competition Committee on 27 November 2018. More papers and presentations on the topic can be found out at

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Gun Jumping – CERES – November 2018 OECD discussion

  1. 1. The View from the Inside: Gun Jumping Challenges Charlesa Ceres November 27, 2018
  2. 2. INTRODUCTION 2017 sales: USD $60.2B 200K+ employees, operating in ~200 countries Four primary business units and ~1000 legal entities Otis- elevators, escalators, and moving walkways UTC Climate, Controls & Security- fire and security systems, air-conditioning systems, building automation Pratt & Whitney- aircraft engines UTC Aerospace Systems- aerospace, defense, and space systems Since 2003, UTC has done 252 merger filings in 40 different jurisdictions 2 United Technologies Global, diverse, large, acquisitive companies face significant gun jumping challenges
  3. 3. CHALLENGES Companies want to follow the rules, but that can be difficult for the following reasons Complicated/unique triggering events or thresholds Notification requirements that don’t have a material local nexus component Overly burdensome processes, unclear or unreasonably lengthy review timing Avoiding gun jumping requires diligence Procedural gun jumping- implementing a transaction without prior notification where notification is mandatory Substantive gun jumping- pre-closing conduct in violation of standstill obligations 3 General comments
  4. 4. PROCEDURAL GUN JUMPING Uncertainty regarding the definition of a “transaction” or “concentration” Unique rules, e.g., intracompany transactions Subjective criteria, e.g., Acquisition of “control” or similar standards (e.g., “competitively significant influence”) Full vs. non-full function joint ventures Passive vs. strategic investments Over inclusive or unclear notification thresholds Low sales thresholds Thresholds that don’t focus on what is being acquired Subjective criteria, e.g., market share Chilling effect on legitimate, non-problematic transactions 4 Challenges
  5. 5. PROCEDURAL GUN JUMPING Constant training of business employees on what might trigger a filing obligation Review transactions centrally for a consistent approach Seek outside counsel review and assistance Consult with agencies pre-notification when available; e.g., U.S. and Mexico Stay up to date on relevant case law, penalties, etc. Strategies to avoid gun jumping 5
  6. 6. PROCEDURAL GUN JUMPING Notification requirements focused on capturing transactions that are more likely to have an impact on competition More objective criteria and international convergence on triggering events and thresholds Sufficient local nexus, e.g., Significant sales in the jurisdiction for the acquired entity or joint venture Local presence for the acquired entity or joint venture Exceptions or less burdensome notifications for transactions unlikely to raise competition issues Consultation/waiver process focused on avoiding unnecessary filings Shorter, definite review periods 6 Wish list
  7. 7. SUBSTANTIVE GUN JUMPING Lengthy, uncertain review periods (harder to keep business in line for long, indefinite periods of time) Retaining the value of the transaction, i.e., consent rights Managing existing and potential agreements between the buyer and seller, e.g., supply contracts, teaming arrangements Dealing with customers/suppliers Dealing with employees 7 Challenges
  8. 8. SUBSTANTIVE GUN JUMPING Constant training of business employees on information sharing and operating as separate companies until closing (business as usual) Provide bright-line rules and require that the business seek legal guidance for any exceptions Consult with outside counsel Stay up to date on relevant case law, penalties, etc., but unfortunately decisions are often very fact specific or the penalized conduct is extreme Strategies to avoid gun jumping 8
  9. 9. SUBSTANTIVE GUN JUMPING More/clearer guidelines for due diligence and integration planning activities, e.g., Safe harbors for HR related activity or employee communications When are joint customer communications allowed? Penalties focused on whether the conduct has or was likely to cause competitive harm; no penalties for technical violations Shorter, more definite review periods 9 Wish list