Australia: Penalties ordered in first ACCC case against gun jumping in M&A deal

Last Updated: 6 April 2019
Article by Dorota Bryks

On 13 February 2019 the Federal Court has ordered Cryosite Limited (Cryosite) to pay penalties of $1.05 million for agreeing to refer customers, and actually referring customers, to a competitor before a sale of business assets was completed.

This is the first time the ACCC has brought a case of gun jumping before the court and was successful. "Gun jumping" occurs when merger or acquisition parties who are competitors, combine or coordinate their conduct before the actual completion of the transaction and prior to obtaining merger control clearance. This behaviour may amount to cartel conduct or, since the introduction of changes in November 2017, a concerted practice, which is prohibited under the Competition and Consumer Act 2010 (CCA) and exposes both involved parties to significant penalties under the Australian competition law.

The relevant facts

  • On 23 June 2017, Cryosite entered into a sale agreement with its competitor, Cell Care Australia Pty Ltd (Cell Care).
  • The sale transaction related to assets used in Cryosite's cord blood and tissue (CBT) banking services business.
  • Cryosite received a non-refundable upfront payment of $500,000.
  • On entering into the sale agreement, Cryosite and Cell Care agreed that during the period between the execution date of the agreement and completion of the proposed sale, Cryosite would refer all sale enquiries in relation to its CBT banking services to Cell Care, (referred to as the 'Cryosite restraint' by the Court).
  • In complying with the restraint, during the period between the execution date of the agreement and completion, Cryosite ceased supplying CBT banking services to any customers with whom it had not already entered into a contract and implemented a process of referring customer enquires to Cell Care.
  • In August 2017, after the ACCC raised concerns, Cryosite and Cell Care ceased to give effect to the restraint.

The law

This case involves multiple breaches of cartel provisions contained in section 44ZZRJ and 44ZZRK of the CCA.

  • Section 44ZZRJ, as it was in force at the time of the contravening conduct, provided that a corporation contravenes that section if the corporation:
    • makes a contract or arrangement, or arrives at an understanding; and
    • the contract, arrangement or understanding contains a cartel provision.
  • Section 44ZZRK, as it was in force, provided that a corporation contravenes that section if:
    • a contract, arrangement or understanding contains a cartel provision; and
    • the corporation gives effect to the cartel provision.
  • The term 'cartel provision' is defined in section 44ZZRD, as then in force. That section sets out two conditions that have to be satisfied in order for a provision of a contract, arrangement or understanding to be a cartel provision:
    • Firstly, either the "purpose/effect" condition in section 44ZZRD(2) or the "purpose" condition in section 44ZZRD(3) must be satisfied. These sections are broad and capture a variety of conduct. More specifically to this case, section 44ZZRD(3) provided that the 'purpose' condition is satisfied if the provision has the purpose of directly or indirectly:
      • preventing, restricting or limiting the supply, or likely supply, of goods or services to persons or classes of persons by any or all of the parties to the contract arrangement or understanding; or
      • allocating between any or all of the parties to the contract, arrangement or understanding the persons or classes of persons who have acquired, or who are likely to acquire, goods or services from any or all of the parties to the contract, arrangement or understanding.
    • The next condition that must be satisfied in relation to a "cartel provision" is the "competition condition" set out in the then section 44ZZRD(4). This condition is satisfied if at least two of the parties to the contract, arrangement or understanding:
      • were, or were likely to be, in competition with each other in relation to the supply, production or acquisition of the goods or services the subject of the impugned provision; or
      • would, or would be likely to, be in competition with each other in relation to the supply, production or acquisition of the goods or services the subject of the impugned provision, but for any contract, arrangement or understanding.

The maximum penalty for breaching the provision described above is the greater of:

  • $10 million;
  • if the total value of the benefits that have been obtained by one or more persons and that are reasonably attributable to the act or omission – 3 times that total value;
  • if the Court cannot determine that total value of those benefits – 10% of the annual turnover of the corporation during the period of 12 months ending at the end of the month in which the act or omission occurred.

The statutory maximum applies to each contravention, not to each course of conduct.

The outcome

Cryosite made admissions of contraventions of the CCA in the following respects:

  • the Cryosite restraint was a cartel provision within the meaning of section 44ZZRD(1); and
  • by entering into the sale agreement, Cryosite made a contract which contained a cartel provision, and thereby contravened section 44ZZRJ; and
  • by giving effect to the Cryosite restraint during the period from 23 June 2017 and August 2017, Cryosite thereby gave effect to a cartel provision in contravention of section 44ZZRK.

As a result, Cryosite was ordered to pay $1.05 million in penalties, which was allocated as follows:

  • $600,000 for making the sale agreement containing the restraint which was deemed to be a cartel provisions, and
  • $450,000 for giving effect to the restraint.

Cryosite was also ordered to pay the ACCC's towards the costs of proceedings in the sum of $50,000.

A number of factors were relevant in the Court's decision to deliver penalties at the lower end of the available maximum penalty. These included:

  • the parties were not able to quantify the value of the benefits from the contravening conduct, other than the upfront payment of $500,000;
  • Cryosite's annual turnover was expected to be in the order of $1 million. The maximum penalty per contravention if the Court applied the maximum penalty would be $10 million.
  • Cryosite's size and weak financial position were taken into account;
  • Crysoite's cooperation with the ACCC in relation to the proceedings;
  • the internal and confidential nature of the conduct between Cryosite and Cell Care;
  • Cryosite's commercial benefits from the breach;
  • the conduct deprived consumers of a choice of provider; and
  • the competitors did not seek merger clearance from the ACCC.
  • Interestingly, it did not matter that in January 2018 Cryosite and Cell Care announced that they would not go ahead with the proposed acquisition. Consequently, Cryosite ceased all CBT services leaving Cell Care as the only available private supplier of CBT banking services.

What this means for your business

In any purchase and sale transaction involving competitors, parties need to be mindful of their conduct throughout the entire process of the deal and conduct themselves at arm's length until a deal has been completed.

To reduce the risks of gun jumping, parties should:

  • continue to operate as independent competitors, including making independent competitive decisions;
  • ensure they are doing everything reasonably and practically possible to maintain independence prior to the completion of the deal, regardless of whether a merger filing is necessary;
  • establish robust confidentiality protocols to ensure that any commercial sensitive information is held separate prior to the completion of the transaction;
  • seek legal guidance on what legitimate information that can be shared between parties; and
  • consider whether a proposed transaction raises competition concerns and whether to seek any form of merger clearance from the ACCC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions