Mergers or other transactions that bring about change-of-control over businesses with an impact on the relevant markets (“concentrations”) in the European Union, when exceeding the relevant national or EU merger-filing thresholds, require prior notification to and a review by the relevant national authority or with the European Commission (the Commission). Failure to notify such planned concentrations before completion (“gun jumping”) is often not intentional but rather the result of a mistake made by either a party or its advisors. Gun jumping generally occurs in one or more of the following circumstances:
- a misinterpretation, whether a letter of intent or other prearrangement, de facto transfers control over a company prior to completion;
- failure to acknowledge whether an acquisition of a minority stake in a company de facto gives control; or
- a misperception of what constitutes negative control in certain multiparty situations, like joint ventures.
Dutch Position: 1 Fine Only
The obligation to notify the Commission of a proposed concentration and the obligation to wait four weeks before the concentration is established are both included in Article 34 of the Dutch Competition Act (Mededingingswet). Since both obligations are included in the same section of the law, the Netherlands Authority for Consumer and Markets (ACM) can only impose one fine for, potentially, two infringed obligations. Furthermore, the ACM previously fined both seller and purchaser of the target company. That duplication was wrong, as these obligations fall to the acquirer of the control (i.e., the purchaser), as was clarified in the Dutch Pacton case (CBb 24 February 2012, ECLI:NL:CBB:2012:BV6874).
EU Position: 2 Fines
The obligation to notify the Commission of a proposed concentration, as prescribed in Article 4(1) of the EU Merger Regulation, implies the obligation to refrain from effectuating the concentration before having obtained approval following the notification, as stated in Article 7(1) of the EU Merger Regulation. The Commission is nonetheless authorized to impose two separate fines in case of an infringement of these obligations. This was most recently confirmed by the EU General Court in the Marine Harvest case of 26 October 2017 (CJEU 26 October 2017, ECLI:EU:T:2017:753).
Marine Harvest Ruling Now Being Tested
Marine Harvest, already a landmark decision on gun jumping, is currently under appeal before the EU Court of Justice (CJEU). The twice-fined company is challenging as unfair the notion that one mistake should result in two independent infringements and thus two sanctions.
There may be a point when the two infringements are caused by the same mistake, and there is an element of fairness in classifying gun jumping as a separate infringement, e.g., if a party, after it found out that it should have made a notification, knowingly continued to neglect the standstill obligation. It will be interesting to see how the CJEU decides the pending appeal and whether the decision affects the interpretation under Dutch administrative law of Article 34 of the Dutch Competition Act by the ACM.