The European Court of Justice (ECJ) has largely upheld the fine imposed by the European Commission on cable distribution and telecoms company Altice in 2018. It ruled that the Commission had rightly fined Altice for premature implementation of the transaction (gun jumping), because Altice had notified the acquisition of PT Portugal too late and had breached the standstill obligation.
This case concerns the acquisition of PT Portugal by Altice. The Commission suspected that Altice was able to exercise decisive control over PT Portugal even before it had been notified to the Commission (and therefore before approval) and did so in practice. By acting in this manner, Altice breached both the notification obligation and the standstill obligation provided for in Articles 4(1) and 7(1), respectively, of Regulation 139/2004. The Commission therefore imposed two separate fines on Altice of €62.5 million each. After appealing those fines before the General Court, Altice was also unsuccessful before the ECJ. Like the General Court, the ECJ did, however, reduce the fine to a limited extent.
The Altice judgment confirms that the notification obligation and the standstill obligation exist separately at a European level. Violation of both provisions may therefore lead to a separate (double) fine. This also applies if both violations are committed simultaneously by implementing a transaction before it has been notified. In the Netherlands, the notification obligation and the standstill obligation are set out in Article 34 of the Mededingingswet (Competition Act). An interesting question is whether the Netherlands Authority for Consumers and Markets (ACM) can also impose two fines. So far, the ACM has not done so, possibly because Article 34 of the Competition Act appears to offer less scope to do so.
This judgment furthermore demonstrates that caution is called for when granting veto rights to the buyer that go beyond what is necessary to preserve the value of the target. The acquisition of veto rights as such is sufficient to constitute gun jumping, regardless of whether the buyer actually exercises those rights. What matters is whether the transaction allows the acquirer to exercise decisive control over the target. If so, a ‘lasting change of control’ may have occurred. If this takes place before a notification has been filed and approved, that constitutes gun jumping.
Finally, the Altice judgment confirms that interference by the buyer in strategic commercial decisions of the target is very likely to constitute the exercising of control and therefore gun jumping. Buyer interventions may be necessary to preserve the value of the target during the period between signing and closing, but these must be actions that are not part of the target's normal business operations. The judgment demonstrates that courts are critical on this point, thus setting a high threshold for companies.
This blog was also published in the Snelrecht section of the Mr. journal. The article can be read here.
Information on a dawn raid by the ACM and the European Commission can be found at invalacm.nl
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