A recent judgment from the General Court of the European Union has shed more light on gun jumping. Gun jumping means not notifying a merger that should have been notified or violating the standstill-period before the merger can be assessed by the competition authority. The case is of particular interest since the fine imposed by the European Commission was upheld, even though the acquiring company did not yet acquire control over the target company.
The EUR 28 million fine was imposed on Canon for jumping the gun in the acquisition of Toshiba Medical Systems Corporation (TMSC) in 2016. The acquisition had a two-step structure in which a ‘warehouse’ was set up as an independent intermediary. In the first step the warehouse acquired the TMSC and in the second step Canon was notified to acquire full control over TMSC. The fine related to the first step. The question before the General Court was whether the implementation of operations in the first step contributing to a lasting change of control over TMSC, possibly even before the acquisition of control over the company, amounted to implementation of a concentration.
The answer from the General Court is a clear ‘yes’. The court considers that there is a distinction between the ‘implementation’ of a transaction and the ‘acquisition of control’. An implementation could be a long-term process while an acquisition can only be a single moment. The decisive notion for gun jumping is ‘implementation’ and not necessarily ‘acquisition’. Therefore, the implementation of a transaction, even before acquiring control – and the warehouse-construction was part of the implementation in this case – is considered gun jumping.
The judgment is a warning for merging companies. Activities that are at first sight considered ‘harmless’ or only preparatory operations could lead to significant fines for gun-jumping, even if the merger is later notified and cleared by the competition authority. It is advisable for companies and their lawyers to seek guidance from the competition authority on the moment on which a merger should be notified, especially if the transaction is shaped unconventionally.
For further information, please contact:
Joost van Roosmalen, Bird & Bird
joost.van.roosmalen@twobirds.com
