France: French Competition Authority Imposes Record Fine For Gun Jumping

This week, the French Competition Authority ("FCA") imposed a EUR 80 million fine on the Altice Group, a major French telecommunications operator, for implementing two transactions before approval by the FCA (so-called "gun jumping"). The full text is not yet available, but this decision already appears noteworthy for two main reasons. First, the infringing behavior did not consist in Altice's failure to notify the transaction to the authorities. Altice had complied with this obligation. The violation consisted in Altice taking steps to exercise a decisive influence on the targets before notifying and before approval by the FCA. This confirms that merging companies should be patient and careful when designing and rolling out integration plans – until approval by the competent antitrust authorities and even until the closing of the transaction. Second, the magnitude of the fine imposed proves that fines for gun-jumping can skyrocket, especially where the value of the transaction is large and multiple instances of premature exercise of control took place.

Legal background

Under EU and French law, the European Commission and the FCA may impose fines of, respectively, 10% and 5% of the turnover of a merger party that fails to notify a reportable transaction prior to its implementation. Both competition authorities have resorted to such fining powers in the past. For instance, in 2013 the FCA fined the Castel Group EUR 4 million for its failure to notify the acquisition of six wine producers.

As a complement, both the European Commission and the FCA may fine a party that has implemented a reportable transaction prior to the authority's decision. This allows the authorities to sanction companies that have complied with the obligation to notify a reportable concentration but have illegally exercised control over the target before obtaining approval. Prior to the Altice decision, the FCA had never fined a company in such circumstances.

The Altice decision

Although no shares or assets of the targeted entities were transferred to Altice prior to the FCA's approval, the FCA found that the acquirer had exercised a decisive influence on the targets and had access to strategic information before filing and obtaining the FCA's approval.

First, in June 2014, the Altice group notified the acquisition of SFR by the Altice group. This acquisition was conditionally approved in October 2014. However, the FCA found that, from April to October 2014, before the FCA's approval, Altice had been involved in the management of SFR, approving numerous strategic decisions. For instance, one of the top managers of Altice had approved the terms and conditions under which an SFR subsidiary was to participate in a tender relating to the development of a fiber optic internet network in France. Altice had also prompted SFR to suspend a promotional offer on very high speed Internet offers. In addition, the Altice group had been closely involved in the acquisition of OTL by SFR in June 2014, since Altice's Chief Executive Officer had received the purchase offer and Altice had superseded SFR in the acquisition. The FCA also found that Altice and SFR had coordinated their commercial strategies, for example by negotiating and preparing together the launching of SFR's range of new broadband services; the launch occurred only a few days after the FCA's approval. Finally the parties had also exchanged confidential information (e.g., individual data or recent commercial performances of SFR) between senior managers from both companies.

Second, in September 2014, the Altice group notified the acquisition of Omer Telecom Limited ("OTL", the provider of "Virgin Mobile" mobile services), which was unconditionally approved in November 2014. However, the FCA later found that Altice had been closely involved in the management of OTL by approving OTL strategic decisions before the FCA's approval; Altice had received weekly information, monitoring OTL's economic performance, and therefore led to access to sensitive information; and OTL's Managing Director had started to perform its functions within the SFR group prior to obtaining the FCA's approval, for example, by being involved in the development of commercial plans concerning SFR.

According to the FCA's press release, the high fine is due to the value of the SFR and OTL reportable acquisitions and of SFR and Virgin Mobile's activities; to the number and gravity of the infringements, since various behaviors had a direct link with the anticompetitive risks outlined by the FCA in its approval decisions; and to the duration of the infringements, which had started in April 2014, i.e., before the notification of the first transaction, and had lasted during both merger control investigations.


Although the decision is not novel across the EU, as the Commission and other authorities previously have imposed fines for gun jumping, at least two main lessons may be drawn from the Altice decision.

First, once published the decision should provide helpful and rare guidance on what constitutes the improper "implementation" of a concentration. In most cases a concentration arises in the presence of a change of control (or a merger). Since "control" is defined as "the possibility of exercising decisive influence," the "implementation" of a concentration covers the situation where the parties either transfer the rights and assets underlying the transaction (i.e., close the transaction) or take other steps that allow the acquirer to exercise "decisive influence" on the target. In the Altice decision, the FCA seems to have taken a broad view of "implementation." The FCA's view seems to be that premature implementation of a transaction may result for instance from strategic decisions taken by the acquirer on behalf of the acquired party; putting in place commercial relationships between the merging parties that are in fact "the implementation of the effects expected from the transaction," and the exchange of commercially sensitive information to prepare strategic decisions, to monitor the target's activities or to prepare the parties' integration.

There may be a fine line between appropriate behavior and the conduct identified as problematic by the FCA. Merging parties therefore should be particularly cautious when preparing and rolling out integration plans. In addition, acquirers should also ensure that they are not granted premature control over target due to provisions in share purchase agreements that limit the seller's ability to affect the acquired business until closing (so as to protect its value).

The Altice decision must also be read in light of the systematic nature of Altice's infringing conduct. According to the FCA's press release, Altice's conduct included "generalized exchanges of strategic information." On the basis of the FCA's press release, it is not clear whether precautionary measures were used, such as properly designed "clean teams," although this seems unlikely. It is important to allow information exchanges through narrow clean teams (limited to certain employees without commercial responsibilities), as it is sometimes indispensable to have discussions on the transaction's expected benefits. On the other hand, such precautionary measures should be adequately designed and applied, not only until approval by the authorities but also until closing, as the parties remain competitors until then.

Second, the decision underlines the FCA's eagerness to aggressively challenge gun jumping. This is illustrated first by the FCA's decision to carry out dawn raids at the merging parties' premises to gather incriminating evidence, a rare step in merger control proceedings. This is also shown by the magnitude of the fine. In view of Altice's turnover, the fine could have been much higher than EUR 80 million. However, the FCA's press release suggests that the penalty is the highest financial sanction ever imposed by a competition authority for gun jumping. Altice's fine likely would have been much higher had it decided to challenge the infringement. Altice's press release asserted that the company had acted "in good faith, in the midst of legal uncertainty" and had chosen "to settle the matter in order to limit its financial exposure, given the level of penalties imposed for this type of procedural violation." Altice's renunciation of its rights of the defense on this point comes at a price, as it will likely prevent any appeal of the decision.

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.

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