On 22 September 2021, the EU's second-highest court, the General Court, confirmed the European Commission's 2018 decision (Case T-425/18—Altice Europe v. Commission) imposing an EUR 124 million fine on Altice Europe NV (Altice) for violating the “standstill” and notification obligations under the EU Merger Control Regulation. This decision represents a significant expansion of EU enforcement against “gun jumping.” This alert examines key implications of the court's decision.

It has long been understood that gun jumping can have serious negative consequences for merging parties. However, in Altice, the European Commission (“Commission”) imposed its highest fine to date in part by suggesting for the first time that a series of “interim covenants” in the share purchase agreement (SPA) regarding the target's (PT Portugal) conduct between signing and closing effectively conferred control on acquirer Altice upon signing.1

The EU General Court has now confirmed the Commission's decision and imposition of fines (Case T-425/18—Altice Europe v. Commission [the Judgment]). In practice, this means that gun jumping in the EU is far broader than the actual exercise of control over the target before merger control approval. Rather, the mere fact that interim covenants gave Altice the possibility to exercise decisive influence on the target's business after signing of an SPA infringed the standstill and notification obligations.

The Judgment provides several important clarifications regarding application of standstill obligations for mergers subject to review in the EU and is consistent with an increasingly stringent approach to competition enforcement in Europe.

Key Implications

  • It is generally accepted that SPA clauses governing interim operations can be appropriate; however, according to the Judgment, such provisions must be “reasonably justified and strictly limited” to what is necessary to protect the buyer's legitimate interest in maintaining the value of the target during the time between signing and closing.
  • The interim operating covenants in SPAs must be drafted with care to avoid undue influence/veto rights of the buyer between signing and merger control approval, because they will be closely scrutinized in the EU and may lead to high fines if not narrowly tailored. According to the Judgment, the onus is on the parties to show that the specific interim covenants are truly necessary.
  • Although the court's judgment is technically limited to EU merger control, national-level competition authorities in the EU will likely adopt the same strict reading on standstill obligations in their national merger control laws.
  • In the United States, the antitrust agencies have contended that acquiring “beneficial ownership” under Section 7 of the Clayton Act similarly requires less than the actual exercise of control,2  and the agencies have challenged covenants deemed to be overbroad.3 However, a court has not opined on whether interim covenants on their own could substantiate a gun jumping violation.


In December 2014, Altice entered an SPA with Oi SA to acquire PT Portugal. As is customary in such cases, the parties contacted the Commission for pre-notification discussions, and after the pre-notification phase filed a notification with the Commission in February 2015. The Commission issued a clearance decision in April 2015.

However, the Commission later learned through press reports about contacts between Altice and PT Portugal before receiving clearance, and opened an investigation into whether Altice had infringed obligations under the EU Merger Control Regulation, which require that transactions falling under the regulation are notified to the Commission before they are implemented (notification obligation) and prohibit their implementation before they are notified and cleared (standstill obligation).4  As the investigation continued, the Commission uncovered at least seven occasions on which Altice intervened in the day-to-day business conduct of the target and instances of exchanges of competitively sensitive information.5

Ultimately, the Commission adopted a decision on 24 April 2018 concluding that (i) certain interim covenants with veto rights in the SPA gave Altice the right to exercise decisive influence over PT Portugal as of the signing of the SPA and (ii) based on these SPA provisions, Altice had actually exercised decisive influence over aspects of PT Portugal's business, such as by giving PT Portugal instructions on certain contracts and marketing campaigns. Notably, the Commission concluded that merely by signing the SPA with the interim covenants, Altice had partially implemented the transaction before notification in violation of Article 4(1) of the EU Merger Control Regulation, because the rights those covenants granted (by themselves and without the contacts that later followed) afforded Altice the possibility to exercise decisive influence over the target's business. We describe in more detail below the SPA provisions on which the Commission focused.

Interim Covenants in the SPA

In reviewing the provisions of the SPA, the court noted that interim ordinary course of business provisions can only be “reasonably justified” if they are “strictly limited” and necessary to preserve the acquirer's legitimate interest in maintaining the value of the target during the interim between signing and closing.6

The court took issue with three categories of provisions,7  which it determined were overbroad and unnecessary to protect Altice's legitimate interests:

  1. Structure of Senior Management. Two provisions in the SPA granted Altice veto rights over the appointment, dismissal and changes to the terms of employment of senior management of PT Portugal. Both the Commission and the court acknowledged that an acquirer's right to oversee certain personnel of the target may be justified to preserve the value of the business between signing and closing.8  However, the specific SPA provisions effectively gave Altice the right to co-determine the structure of the target's entire senior management group.9
  2. Pricing Policies. One provision in the SPA required the target to obtain consent from Altice to a wide range of decisions regarding pricing and client contracts. The court observed that the provision was written so broadly as to require the target to obtain Altice's consent to any change in prices.10
  3. Approval of Material Contracts. Several provisions of the SPA obliged PT Portugal to obtain Altice's consent to enter, terminate or modify certain material contracts before the closing of the transaction. While not questioning the buyer's legitimate interest in approving material contracts, the court observed that the specific provisions at hand did “indeed go beyond” what is necessary to maintain the value of Altice's investment11  because they covered a wide range of commercial matters and the monetary threshold to determine a contract's materiality was exceedingly low at EUR 5 million/EUR 1 million.12  The Judgment does not provide guidance on what monetary threshold would have been legitimate or the general criteria to calculate such a threshold. In its fining decision, the Commission referred to the purchase price of EUR 7.4 billion and the target's turnover of EUR 2.5 billion in 2014 to illustrate that the value thresholds were too low, accounting for less than 0.1% of the purchase price. Moreover, the target was required to seek consent from Altice regardless of whether the contract was in the ordinary course of business.13

The court—like the Commission—separately considered whether Altice actually exercised influence over PT Portugal under the interim covenants and highlighted several instances in which Altice was intimately involved in the day-to-day operations of the target.14  However, the court made clear that execution of the SPA with the above provisions—by itself—was a violation of the notification and standstill obligations.15

Notably, Altice argued that it could not have known that these provisions would violate the EU Merger Control Regulation because there was no relevant case law and Altice did not act in bad faith.16  The court swiftly rejected this argument, indicating that parties are “expected to take special care in assessing the risk” associated with particular interim covenants17  and to consult with the Commission in the event of any doubt regarding specific SPA provisions.18


Interim covenants are commonly used in transaction agreements. Following the Altice judgment, parties should err on the side of caution when agreeing to such clauses and work closely with antitrust counsel to avoid gun-jumping violations. Interim covenants need to be reviewed carefully as to whether they are truly necessary to preserve the target's value or to protect the commercial integrity of the target. Veto rights regarding the target's day-to-day business strategy (e.g., pricing policies) and senior management are particularly susceptible to scrutiny.

It has been well recognized that an acquirer can engage in gun jumping by actually interfering with the business of the target before receiving merger clearance. The Judgment goes beyond this rule in finding a violation of the standstill obligation based on a mere possibility of such interference and reflects an increasingly stringent approach to competition enforcement in Europe.


1 The Commission also observed that Altice had actually intervened in the day-to-day business of PT Portugal, and the parties had exchanged competitively sensitive information on an ongoing basis starting when the SPA was signed. See General Court of the European Union, Press Release No 160/21 (Sept. 22, 2021).

2 See, e.g., Complaint at ¶¶ 3-8, United States v. Canon Inc., 19-cv-01680 (D.D.C. June 10, 2019).

3 See, e.g., Complaint at ¶ 2, United States v. Comput. Assocs. Int'l, Inc., 01-cv-02062 (D.D.C. September 28, 2001).

4 See Art. 4(1) and 7(1) of Commission Regulation (EC) No. 139/2004 (Jan. 20, 2004), on the control of concentrations between undertakings. Very exceptionally, the Commission may grant a derogation, under Art. 7(3) of this regulation, and allow parties to take certain actions before receiving merger clearance.

5 See Case T-425/18—Altice Europe v. Commission, at paras. 170–218.

6 See id., para. 108.

7 Id., para. 109.

8 See id., para. 110.

9 Id., para. 114.

10 Id., para. 115.

11 Id., para. 117.

12 Id., paras. 117, 121

13 Id., paras. 109, 117.

14 Id., paras. 173–218.

15 See id., paras. 132, 154.

16 See id., para. 134.

17 See id., para. 148.

18 See id., para. 155.

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.