European Union: Court Of Justice Of The European Union Clarifies Scope Of Standstill Obligation Under EU Merger Regulation

Last Updated: 27 June 2018
Article by Becket McGrath and Christine Graham

A transaction which falls within the scope of the EU Merger Regulation (EUMR) must be notified to the European Commission (Commission) before closing and must not be implemented until the Commission has issued its clearance decision (the "standstill obligation"). Parties that breach the standstill obligation (commonly referred to as gun-jumping) face fines of up to 10% of the company's worldwide turnover.

To date, there has been surprisingly limited guidance on the scope of the standstill obligation, yet the consequences of getting it wrong are serious. In April 2018, the Commission imposed a record fine of €124.5 million (c.$150 million) on the multinational telecoms company, Altice, for gun-jumping (see here for our briefing). In that case, the Commission found that Altice had acquired the legal right to exercise decisive influence over PT Portugal prior to clearance and that, in certain cases, Altice had actually exercised this right. That case forms part of a wider move by the Commission to take a stricter line against gun-jumping.

In the context of this enhanced enforcement by the Commission, a recent judgment by the Court of Justice of the European Union (CJEU) in a preliminary reference from a Danish court has provided welcome clarification of the scope of the standstill obligation under the EUMR. Specifically, the CJEU concluded that the standstill obligation applies only to measures that actually contribute to the change of control of the target business. Preparatory or ancillary measures that do not in themselves confer control, or directly contribute to a change of control, do not form part of the concentration and are therefore not caught.


This case arose from a decision by the Danish operation of accountants KPMG to become part of rival firm Ernst & Young (EY). Due to the size of KPMG's Danish operation, the move to EY was subject to Danish merger control. Critically for the purposes of this case, Danish merger control applies a standstill obligation that is based on that imposed by the EUMR.

KPMG Denmark (KPMG DK) and EY duly entered into a merger agreement on 18 November 2013 to put this into effect. On the same date, and before the merger had been notified or approved by the Danish Competition Council (DCC), KPMG DK gave notice of its decision to terminate its existing cooperation agreement with KPMG International. The notice was effective immediately, although termination did not take effect until several months later. The KPMG DK/EY merger was subsequently notified to the Danish Competition and Consumer Authority in December 2013 and conditionally approved by the DCC in May 2014.

On 17 December 2014, the DCC ruled that KPMG DK had breached the standstill obligation by giving notice to terminate its cooperation agreement with KPMG International, on the basis that the termination notice was related to the merger, irreversible and likely to have market effects. EY challenged the DCC's decision before the Danish Maritime and Commercial Court, which subsequently referred the case to the CJEU for a preliminary ruling on the scope of the standstill obligation. The fact that the relevant provisions of Danish merger control law were drafted with the EUMR in mind meant that the position as a matter of EU law as to the scope of the EUMR's standstill obligation had a direct bearing on the Danish appeal and hence the CJEU had jurisdiction.

CJEU judgment

The CJEU started from the position that the scope of the standstill obligation is determined by the definition of 'concentration' under the EUMR, since that is the conduct that the EUMR is ultimately designed to control. Under Article 3 EUMR, a 'concentration' arises where there is a "change of control on a lasting basis." Accordingly, the CJEU held that the standstill obligation only prohibits conduct that contributes to a lasting change in the control of the target undertaking.

While this would catch acts that amounted to "partial implementation" of a concentration, ancillary or preparatory measures which did not have a "direct functional link" with the implementation of the transaction were not caught. The fact that such measures may produce market effects was irrelevant.

By choosing to focus on whether a measure "contributes as such" to a change in control, the Court adopted an approach that was significantly narrower than that favoured by the Danish Government and indeed by the Commission itself in these proceedings. The Court expressly rejected the argument that it should be sufficient that a step was a necessary prerequisite for a merger to take effect for it to be caught. While KPMG DK's notice to terminate its cooperation agreement with KPMG began the process by which it became free to move to EY, it did not in itself confer on EY any degree of control over KPMG DK. As a result, it did not amount to implementation of a transaction and hence did not infringe the standstill obligation.

Implications for merging parties

This judgment confirms that, as a matter of EU law, preparatory or ancillary measures taken in the context of a merger transaction should fall outside the standstill obligation. However, care must still be taken over early implementation of any steps under a merger agreement. It is notable that the CJEU ruled that implementation arises from any transaction which "in whole or in part, in fact or in law, contributes to the change in control of the target" (emphasis added). While this is a narrower test than assessing whether a transaction is severable, or interconditional on other elements of a merger, the Court has left some residual uncertainty over when an implementation step amounts to a transaction that 'partially contributes' to a change in control. (Although the Advocate General helpfully referred in his Opinion to the importance of severability in the assessment of whether a prior measure forms part of a concentration, and also noted that termination of the KPMG cooperation agreement was not "inextricably linked" to the change in control over KPMG DK, neither of these points was specifically adopted by the CJEU's final judgment.) It remains to be seen whether further clarity will be provided in future cases. Given that this is the first CJEU judgment dealing with gun-jumping since the EUMR was first introduced in 1989, it may be a long wait.

In a timely reminder of the importance of detailed monitoring of merger implementation, the UK Competition and Markets Authority (CMA) recently imposed a fine of £100,000 (c.$132,000) on Electro Rent Corporation (Electro Rent) for failing to comply with the terms of an interim order imposed by the CMA which prohibited further implementation of Electro Rent's completed acquisition of Microlease pending the CMA's review of the transaction (see here for the CMA's decision notice). (While the UK does not impose a mandatory standstill obligation for all mergers, it does impose stringent standstill obligations on completed mergers that are under review, to prevent further integration until the CMA has determined whether the transaction raises material concerns.) In breach of the interim order, Electro Rent terminated the lease over the only premises Electro Rent had in the UK without the CMA's prior consent. Remarkably, the CMA ruled that the fact that Electro Rent had obtained the consent of the appointed Monitoring Trustee was not a "reasonable excuse" for failing to comply with the interim order. While the issues in this case were specific to the peculiarities of the UK regime, this is nevertheless of wider interest as it marks the first time that the CMA has fined a company for such a procedural breach. As such, it does appear to be part of a wider trend towards more robust enforcement of standstill obligations across the EU.

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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must 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