United States: Senior EU Court Adviser Provides Welcome Guidance On Gun-Jumping

EU and US laws prohibit merging companies from implementing reportable transactions until their deal is cleared or the statutory waiting period has expired. Violations of this principle are colloquially known as "gun-jumping" and can have serious negative consequences for the parties. If the parties are competitors, pre-closing activity can also infringe the general rules against anticompetitive agreements (e.g., Section 1 Sherman Act and Art. 101 TFEU).

Navigating gun-jumping rules can be difficult because there are few bright lines and little concrete guidance—especially in the EU, where neither the European Commission (EC) nor the courts have set clear standards for permissible integration planning activity before merger clearance and closing. In a welcome development, Advocate General Nils Wahl, a senior adviser to the Court of Justice of the European Union (CJEU), recently clarified EU gun-jumping principles. The attached alert summarizes AG Wahl's opinion and other recent developments in gun-jumping doctrine in the EU and compares EU doctrine with that of the United States.

Key implications

  • The EC is increasingly focused on procedural infringements of its merger law. Notably, it has fined companies for failing to notify acquisitions before closing.
  • In his recent opinion, AG Wahl proposed that integration planning conduct that (i) occurs before and (ii) is severable from measures that result in a change of control should not constitute gun-jumping.
  • The CJEU is not bound by Advocate General opinions, but often follows them. In any case, the CJEU should use this opportunity to provide guidance on how legitimate integration planning is distinguished from unlawful gun-jumping.
  • The United States has provided significantly more gun-jumping guidance. However, the rules in this area remain fact-intensive, and parties should work closely with antitrust counsel to avoid gun-jumping violations.


Investigations into gun-jumping are becoming more common in the EU. To date, however, most of these investigations have concerned failures to notify the EC of a transaction,1 not pre-closing activity.

AG Wahl's opinion arose from the proposed merger of KPMG's Danish affiliates (KPMG DK) with Ernst & Young (EY). It has presented the CJEU with a chance to provide guidance on permissible pre-integration conduct.2

The facts briefly are as follows: KPMG DK agreed to merge with EY. Before receiving merger clearance from the Danish competition authority, KPMG terminated a cooperation agreement with the KPMG international network. The Danish competition authority subsequently cleared the merger. A few months later, however, the authority ruled that, by terminating the cooperation agreement pre-clearance, KPMG DK had infringed the standstill obligation.3

EY appealed the decision and the Danish court decided to ask the CJEU questions regarding the scope of the standstill obligation. In its pleadings, the EC indicated that it supported the Danish authority's interpretation of the standstill obligation.

Measures prohibited by the standstill obligation

The standstill obligation is triggered when a proposed transaction is reportable under EU or member state merger control law. That requires, among other things, an intent by one company to acquire control of another. Accordingly, AG Wahl reasoned, conduct can infringe the standstill obligation only when it allows the possibility to acquire control over a target's activities.4 By contrast, conduct that does not result in the possibility to acquire control of the target before competition clearance—e.g., pre-closing integration planning—does not violate the standstill obligation.

The Advocate General made two significant observations in reaching his conclusion: first, he acknowledged that the standstill obligation proscribes both partial and full implementation of a transaction pre-competition clearance. Thus, even conduct that does not represent total exercise of control—such as an instruction to a target's management to take certain actions— can violate the standstill obligation. Second, he found that whether the conduct at issue will actually affect competition is irrelevant to determining whether that conduct violates the standstill obligation. According to the Advocate General, if every measure with potential market effects constituted gun-jumping, the standstill obligation would be too broad. Conversely, if actual market effects were necessary, the standstill obligation might be too narrow. Given that he deemed market effects irrelevant, the Advocate General did not address what types of market effects might be deemed to violate the standstill obligation if market effects mattered. It will be interesting to see whether the CJEU agrees that market effects are irrelevant to evaluating potential violations of the standstill obligation; and, if not, whether it provides any guidance regarding the role that market effects should play in the analysis.

Turning to the facts of the case, the Advocate General considered that the termination of the cooperation agreement was not inextricably linked to a pre-competition clearance change in control of KPMG DK. It was therefore merely a preparatory measure to the ultimate post- clearance change of control and not a violation of the standstill obligation.

Potential impact of AG Wahl's Opinion

As noted above, Advocate General opinions are not binding on the CJEU. The CJEU's judgment should be released in the next year and hopefully will provide additional certainty for parties involved in pre-clearance activities.

The Advocate General's opinion is noteworthy primarily because it rejects the EC's much broader interpretation of the standstill obligation. According to the EC's submissions in support of the Danish authority, even measures that do not give the possibility of exercising control over the target's business can violate the standstill obligation. This approach not only creates significant uncertainty regarding what pre-closing activities are permissible, but potentially outlaws categories of pre-closing conduct that can help merging parties achieve transaction efficiencies from Day 1 without impairing the target from competing independently pre-closing.

If the CJEU endorses AG Wahl's views, it will provide much-needed guidance to companies engaged in integration planning. They will know that they will not infringe the standstill obligation provided that they (i) avoid premature acquisition of the possibility to exercise decisive influence over the target5 and (ii) comply with general EU competition law, including the prohibition, under Article 101 of the Treaty on the Functioning of the European Union (TFEU), on competitors engaging in illegal collusion or improperly exchanging competitively sensitive information.6

Gun-jumping guidance from the CJEU would also be relevant in the EC's ongoing investigation into Altice, which the EC alleges began to implement its acquisition of PT Portugal before clearance.7 EC Commissioner Margrethe Vestager has indicated that Altice allegedly gave instructions to PT Portugal regarding contract negotiations while the EC's merger investigation was still pending.8

Guidance in the United States

The Department of Justice (DOJ) and Federal Trade Commission (FTC) have given some guidance on acceptable pre-closing conduct, mainly through enforcement actions and speeches.9

Like in Europe, gun-jumping risks in the United States fall into two categories: (i) assuming control of the target before obtaining antitrust clearance for a reportable transaction and (ii) impermissible coordination between parties that are independent entities pre-closing.

Assumption of corporate control. Acquirers in the United States are prohibited from obtaining operational or financial control—described as "beneficial ownership"—of the target before the expiration of the applicable Hart-Scott-Rodino (HSR) waiting period.10 Whether an acquirer has obtained beneficial ownership is fact-specific, and can include "indicia" of ownership that fall short of full control over the target, such as assuming control of contracts, integrating operations, making joint decisions, or transferring confidential business information for purposes other than due diligence or integration planning.11

In practice, this means the parties to a transaction must continue to operate independently until closing. It also means an acquirer may not interfere with competitive decision making or influence the ordinary course operations of the seller. Parties currently can be fined up to $40,654 for each day of the violation, an amount subject to regular adjustment for inflation.12

Pre-closing coordination. If the parties are competitors, coordination before closing can constitute illegal gun-jumping, even after the parties have obtained merger clearance from the agencies, or even if the deal was not reportable in the first place.

Section 1 of the Sherman Act prohibits agreements in restraint of trade, including coordinating with a competitor on price or contract terms, allocating customers or markets, or agreeing not to compete. Parties can also violate Section 1 by (i) exchanging competitively sensitive information that will dampen competition between them, such as providing customer lists, prices, or plans for future products or services, or (ii) coordinating customer negotiations for sales to be made after closing (such as negotiations for long-term contracts). Gun-jumping that violates Section 1 can be subject to serious penalties, including treble damages and possible criminal enforcement.

Practical considerations. The US agencies have recognized that parties to a transaction need to take reasonable steps to plan for closing. Prematurely acquiring beneficial ownership before the HSR waiting period expires will constitute a violation—whether or not it results in any actual anticompetitive effects. But absent that, the agencies evaluate whether the coordination could result in any actual anticompetitive effects and, if so, whether it is reasonably necessary to implement legitimate objectives of the merger agreement.13

This test has several implications for parties to a merger. First, parties should ensure that they continue to compete throughout the integration planning process. Second, parties should avoid any actions that might suggest that the acquirer has assumed control of the seller. Parties should also continue to make their own business decisions independently, without consulting with one another and regardless of whether they are competitors. Although integration planning and certain information exchanges are permitted, parties should be careful not to cross the line between permissible integration planning on the one hand, and impermissible integration on the other. Where potentially sensitive information is exchanged, parties should consider using a "clean team" of employees or consultants, who may access the information for the limited purpose of integration planning without risking impairing pre-closing competition between the parties.14 Whether or not the parties use a clean team, employees involved in the integration planning process should be counseled on gun-jumping, and should consult with antitrust counsel before disclosing any potentially competitively sensitive information.

Complying with EU and US law before a contemplated merger closes can raise difficult and fact- intensive questions. Even if fines are not imposed, a gun-jumping investigation can negatively affect a proposed transaction by lengthening the review period, calling into question the parties' credibility when advocating for the transaction, and imposing costs and burde should therefore work closely with antitrust counsel to avoid gun-jumping violations.


1 Three recent investigations focused on cases where parties allegedly obtained control without obtaining prior merger clearance.

In October 2017, the General Court of the European Union ("GC") upheld a €20 million fine imposed on Marine Harvest for gun-jumping. Marine Harvest had initially purchased 48.5% of the shares of a target before notifying an intended acquisition of the remainder of the shares to the EC. The GC held that Marine Harvest could have exercised decisive influence over the target with its 48.5% shareholding, which meant that it had already acquired control.

Last summer, the EC announced that it is investigating Canon's use of a structure under which a third party acquired the voting shares of Toshiba Medical Systems Corporation in a nonreportable transaction, with an option for Canon to acquire the voting shares that was exercisable only after it obtained antitrust clearance. The EC's investigation is pending.

In November 2016, the French competition authority found that Altice had obtained strategic information about a target and intervened in the target's operational management before receiving merger clearance. The authority imposed a fine of €80 million.

2 Although the case interprets Danish law, the relevant Danish law mirrors EU law, and the opinion therefore applies equally to the EU law standstill obligation.

3 See Art. 7 of Commission Regulation (EC) No. 139/2004 (Jan. 20, 2004), on the control of concentrations between undertakings. Very exceptionally, the EC may grant a derogation, under Art. 7(3) of this Regulation, and allow parties to take certain actions before receiving merger clearance.

4 Opinion of AG Wahl, Case C‑633/16, Ernst & Young P/S v. Konkurrencerådet, ECLI:EU:C:2018:23, Jan. 18, 2018.

5 For further guidance on the notion of decisive influence, see Commission Consolidated Jurisdictional Notice, 2008 OJ 2008 C95/1 (Apr. 16, 2008).

6 In Case No COMP/M.4734 Ineos/Kerling, the EC investigated whether (i) the acquirer had intervened in the management of the target while the EC's merger investigation was ongoing and (ii) whether the parties, who were competitors, had exchanged competitively sensitive information. The EC concluded that there was no evidence of EU law having been violated.

7 See European Commission Press Release IP/17/1368, Mergers: Commission Alleges Altice Breached EU Rules by Early Implementation of PT Portugal Acquisition (May 18, 2017).

8 See Margrethe Vestager, Competition and the Rule of Law, Speech Delivered at the Romanian Competition Council Anniversary Event, Bucharest (May 18, 2017) https://ec.europ 2014-2019/vestager/announcements/competition-and-rule-law_en.

9 The last time the agencies made a comprehensive statement on gun-jumping was in 2005, when the General Counsel to the FTC made public remarks before the Association of Corporate Counsel. William Blumenthal, The Rhetoric of Gun-Jumping, Remarks Before the Ass'n of Corporate Counsel (Nov. 10, 2005).

10 See 15 U.S.C. § 18a.

11 William J. Baer, Former Director, Bureau of Competition, Report from the Bureau of Competition, ABA Antitrust Section Spring Meeting, Apr. 15, 1999, https://www.ftc.gov/public-statements/1999/04/report-bureau-competition.

12 See US Federal Trade Commission, FTC Publishes Inflation-Adjusted Civil Penalty Amounts, Jan. 12, 2017, https://www.ftc.gov/news-events/press-releases/2017/01/ftc-publishes-inflation-adjusted-civil-penalty-amounts

13 a note 9, at 2, 7-8.

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 Mondaq.com.

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

In association with
Related Topics
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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