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Gun Jumping – WHISH – November 2018 OECD discussion

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This presentation by Richard WHISH, Professor of Law, King's College London, 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 oe.cd/gjc.

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Gun Jumping – WHISH – November 2018 OECD discussion

  1. 1. Professor Richard Whish OECD, 27 November 2018
  2. 2. TERMINOLOGY  DISTINGUISH ‘PROCEDURAL’ AND ‘SUBSTANTIVE’ GUN-JUMPING  PROCEDURAL GUN-JUMPING REFERS TO A FAILURE TO NOTIFY A MERGER  SUBSTANTIVE GUN-JUMPING INVOLVES SOME ELEMENT OF IMPLEMENTATION OF A MERGER PRIOR TO CLEARANCE FROM THE RELEVANT COMPETITION AUTHORITY Richard WhishOECD 2
  3. 3. RELEVANT PROVISIONS OF EU LAW  ARTICLE 4 EUMR: ‘CONCENTRATIONS … SHALL BE NOTIFIED TO THE COMMISSION PRIOR TO THEIR IMPLEMENTATION …’  ARTICLE 7 EUMR: ‘A CONCENTRATION … SHALL NOT BE IMPLEMENTED EITHER BEFORE ITS NOTIFICATION OR UNTIL IT HAS BEEN DECLARED COMPATIBLE WITH THE COMMON MARKET …’ Richard WhishOECD 3
  4. 4. RELEVANT PROVISIONS OF EU LAW  ARTICLE 14(2) EUMR: THE COMMISSION MAY IMPOSE FINES FOR  (A) FAILURE TO NOTIFY A CONCENTRATION CONTRARY TO ARTICLE 4 AND  (B) IMPLEMENTATION OF A CONCENTRATION CONTRARY TO ARTICLE 7  IN ALTICE/PT PORTUGAL THERE WERE TWO FINES OF €62.5 MILLION, ONE FOR INFRINGING ARTICLE 14(2)(A) AND ONE FOR INFRINGING ARTICLE 14(2)(B) Richard WhishOECD 4
  5. 5. RELEVANT PROVISIONS OF EU LAW  ARTICLE 101 TFEU PROHIBITS AGREEMENTS AND CONCERTED PRACTICES THAT HAVE AS THEIR OBJECT OR EFFECT THE RESTRICTION OF COMPETITION  ARTICLE 23 REGULATION 1/2003: THE COMMISSION MAY IMPOSE FINES FOR INFRINGING ARTICLE 101 TFEU  ARTICLE 21(1) EUMR:‘THIS REGULATION ALONE SHALL APPLY TO CONCENTRATIONS…’ Richard WhishOECD 5
  6. 6. RELEVANT PROVISIONS OF US LAW  SECTION 7A CLAYTON ACT/HART-SCOTT- RODINO ANTITRUST IMPROVEMENTS ACT: A VIOLATION OF THE STANDSTILL OBLIGATION OCCURS WHERE A BUYER EFFECTIVELY GAINS BENEFICIAL OWNERSHIP OF THE SELLER PRIOR TO OR CLOSE TO THE TRANSACTION  SECTION 1 SHERMAN ACT 1890 PROHIBITS CONTRACTS IN RESTRAINT OF TRADE Richard WhishOECD 6
  7. 7. RECENT EU CASES  CASE C-633/16 ERNST & YOUNG P/S V KONKURRENCERÅDET, 31 MAY 2018  THE CASE IS ACTUALLY ON A POINT OF DANISH LAW WHICH MIRRORS ARTICLE 7(1) EUMR  THIS IS THE FIRST CASE AT THE COURT OF JUSTICE ON THIS TOPIC  KPMG DK/EY AGREED A MERGER 18 NOVEMBER 2013; NOTIFIED TO THE DANISH COMPETITION AUTHORITY 13 DECEMBER 2013; CLEARED 28 MAY 2014 SUBJECT TO COMMITMENTS Richard WhishOECD 7
  8. 8. RECENT EU CASES  ERNST & YOUNG  KPMG DK WAS A MEMBER OF THE KPMG INTERNATIONAL COOPERATIVE PURSUANT TO A COOPERATION AGREEMENT OF 15 FEBRUARY 2010  KPMG DK ANNOUNCED ON 18 NOVEMBER 2013 (THE DAY OF THE MERGER AGREEMENT) THAT IT WAS TERMINATING THE COOPERATION AGREEMENT WITH EFFECT FROM 30 SEPTEMBER 2014 Richard WhishOECD 8
  9. 9. RECENT EU CASES  ERNST & YOUNG  ON 17 DECEMBER 2014 THE COMPETITION COUNCIL DECIDED THAT THERE HAD BEEN AN INFRINGEMENT OF THE STANDSTILL OBLIGATION  THE MARITIME AND COMMERCIAL COURT ASKED THE COURT OF JUSTICE WHETHER THE TERMINATION OF THE COOPERATION AGREEMENT INVOLVED A BREACH OF THE STANDSTILL OBLIGATION Richard WhishOECD 9
  10. 10. RECENT EU CASES  ERNST & YOUNG  ARTICLE 7(1) PROVIDES THAT A CONCENTRATION MUST NOT BE ‘IMPLEMENTED’ PRIOR TO NOTIFICATION AND CLEARANCE (PARA 37)  ARTICLE 7(1) DOES NOT ITSELF EXPLAIN WHAT IS MEANT BY IMPLMENTATION (PARA 38)  SO THIS MUST BE DETERMINED BY REFERENCE TO PURPOSE OF THE RULE AND THE GENERAL SCHEME OF THE EUMR (PARA 40) Richard WhishOECD 10
  11. 11. RECENT EU CASES  ERNST & YOUNG  THE PURPOSE OF ARTICLE 7(1) IS TO PREVENT IMPLMENTATION OF A CONCENTRATION PRIOR TO NOTIFICATION/CLEARANCE, MEANING A LASTING CHANGE OF CONTROL  TRANSACTIONS WHICH ARE NOT NECESSARY TO ACHIEVE A CHANGE OF CONTROL ARE NOT CAUGHT BY ARTICLE 7(1)  THE FACT THAT THEY MAY HAVE EFFECTS DOES NOT MEAN THAT ARTICLE 7(1) IS ENGAGED (PARA 50)A LASTING CHANGE IN CONTROL Richard WhishOECD 11
  12. 12. RECENT EU CASES  ERNST & YOUNG  ACTIONS THAT DO NOT AMOUNT TO CONCENTRATIONS MAY LEAD TO COORDINATION IN BREACH OF ARTICLE 101 TFEU (PARA 57)  IT FOLLOWS THAT ARTICLE 7(1) EUMR SHOULD NOT BE UNDULY EXTENDED, AS THAT WOULD HAVE THE EFFECT OF LIMITING THE SCOPE OF APPLICATION OF ARTICLE 101 TFEU (PARA 58)  THE DANISH AUTHORITY SUBSEQUENTLY HELD THERE WAS NO INFRINGEMENT: STATEMENT OF 7 SEPTEMBER 2018 Richard WhishOECD 12
  13. 13. RECENT EU CASES  ALTICE/PT PORTUGAL, 24 APRIL 2018  COMMISSION DECISION IMPOSING TWO FINES, EACH OF €62.5 MILLION, FOR INFRINGING ARTICLE 4(1) AND ARTICLE 7(1) EUMR  ON APPEAL TO THE GENERAL COURT CASE T-425/18, NOT YET DECIDED  SHARE PURCHASE AGREEMENT 9 DECEMBER 2014: ALTICE TO ACQUIRE PT  NOTIFICATION 25 FEBRUARY 2015; CLEARED SUBJECT TO COMMITMENTS 20 APRIL 2015 Richard WhishOECD 13
  14. 14. RECENT EU CASES  ALTICE  BREACH OF ARTICLE 7(1): PARAS 58-484  THE TRANSACTION AGREEMENT CONTAINED VETO RIGHTS THAT WENT BEYOND WHAT WAS NECESSARY TO PRESERVE THE VALUE OF THE TARGET’S BUSINESS  AND ALTICE EXERCISED INFLUENCE OVER THE TARGET  EXCHANGES OF INFORMATION CONTRIBUTED TO THAT INFLUENCE  BREACH OF ARTICLE 4(1): PARAS 485-491 Richard WhishOECD 14
  15. 15. RECENT EU CASES  ALTICE  THE COMMISSION SAYS THAT IT RECOGNISES THAT IT IS STANDARD TO HAVE CLAUSES IN AGREEMENTS TO PRESERVE THE VALUE OF THE BUSINESS TO BE TRANSFERRED (PARA 50)  BUT IN THIS CASE IT NOTES THAT THE EXCHANGES OF INFORMATION TOOK PLACE WITHOUT ANY SAFEGUARDS SUCH AS CONFIDENTIALITY AGREEMENTS, NON- DISCLOSURE AGREEMENTS OR ‘CLEAN-TEAM’ ARRANGEMENTS Richard WhishOECD 15
  16. 16. CONCLUSIONS  IT IS IMPORTANT TO STUDY THE SPECIFIC PROVISIONS OF EACH LEGAL SYSTEM: DO OTHER SYSTEMS HAVE THE EQUIVALENT OF ARTICLE 21(1) EUMR?  ERNST & YOUNG IS CLEAR THAT ACTIONS THAT DO NOT THEMSELVES CONTRIBUTE TO THE ACQUISITION OF CONTROL CAN INFRINGE ARTICLE 101 TFEU  NOTE: DIFFERENT PROCEDURES AND FINES FOR EUMR AND ARTICLE 101 TFEU Richard WhishOECD 16
  17. 17. CONCLUSIONS  IS THE COMMISSION’S APPROACH IN ALTICE CONSISTENT WITH THE COURT OF JUSTICE’S IN ERNST & YOUNG? THE GENERAL COURT WILL HAVE TO DECIDE  WATCH OUT FOR THE COMMISSION’S DECISION ON ‘WAREHOUSING’ IN CANON, COMMISSION PRESS RELEASE OF 6 JULY 2017: IS WAREHOUSING ‘IMPLEMENTATION’? Richard WhishOECD 17
  18. 18. THANK YOU FOR YOUR ATTENTION! Richard WhishOECD 18

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