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EU General Court Clarifies Rules on Gun Jumping

On September 22, 2021, the EU General Court (GC) upheld a decision from the European Commission (Commission) by which it fined telecommunications operator Altice for gun jumping (T-425/18, Altice Europe v Commission). In particular, the GC affirmed that the Commission could impose two separate fines: (i) a fine for implementing a concentration prior to its clearance by the Commission, and (ii) a fine for implementing a concentration prior to its notification. In coming to those findings, the GC also clarified the appropriateness of certain pre-closing covenants and information exchanges.

CASE HISTORY

  • In December 2014, Altice signed a share purchase agreement (SPA) with telecommunications operator Oi to acquire PT Portugal. The deal was subject to EU merger control.
  • Prior to signing, Altice began communications with the Commission to inform it of its intention to acquire PT Portugal. Shortly after signing, Altice sent a case-team allocation request to the Commission and commenced pre-notification discussions with the Commission. Altice formally notified the transaction in February 2015; in April 2015, the Commission cleared the acquisition subject to commitments.
  • A gun-jumping investigation arose following press reports of contacts between Altice and PT Portugal, which took place before the adoption of the Commission’s clearance decision.
  • Three years after clearing the acquisition, the Commission concluded that Altice infringed both the notification obligation and the standstill obligation under the EU Merger Regulation and imposed two separate fines with a total amount of EUR 124.5 million.
  • The Commission found that Altice had the possibility of exercising decisive influence or had exercised decisive influence over PT Portugal before the adoption of the clearance decision and, in some instances, before notification:
    • Certain pre-closing provisions included in the SPA gave Altice the right to veto decisions regarding PT Portugal’s commercial policy.
    • Based on these provisions, Altice had been involved in the day-to-day running of PT Portugal in several instances.
  • Altice brought an action for annulment before the GC, which was dismissed in part. The GC sided with the Commission, but reduced the fine relating to the infringement of the notification obligation by 10% (from EUR 62.25 million to EUR 56.025 million). The GC considered it appropriate to lower the fine because Altice had informed the Commission of the concentration before the signing of the SPA, and it had sent a case-team allocation request to the Commission shortly after signing.

CASE LEARNINGS

  • The notification obligation and standstill obligation can be subject to separate fines. The GC held that the notification obligation (obligation to act) and standstill obligation (obligation not to act) are separate obligations. Because each obligation was violated, the Commission was entitled to impose two fines.
  • Pre-closing provisions included in a SPA cannot afford a purchaser the possibility to exercise decisive influence over the target. EU merger rules do not preclude pre-closing provisions in a SPA aimed at protecting the value of the target between signing and closing. However, such provisions can only be [...]

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Antitrust M&A Snapshot | Q2 2021

In the United States, aggressive antitrust enforcement is likely to continue with the appointment of Lina Khan as Federal Trade Commission (FTC) Chair and the nomination of Jonathan Kanter to lead the Department of Justice’s (DOJ) Antitrust Division. The premerger notification landscape continues to shift as filings reach another record high. Technology companies remain in the “hot seat” as legislators in the US House of Representatives introduced five antitrust reform bills that would change the enforcement landscape for digital platforms, including seeking to preclude large digital platform companies from acquiring smaller, nascent competitors. And the US Department of Justice is making good on President Biden’s pledge to regulate “Big Ag” by challenging Zen-Noh Grain Corporation’s proposed acquisition of 38 grain elevators from Bunge North America, Inc.

Meanwhile, in Q1 2021, the European Commission (Commission) published its Guidance on Article 22 of the EU Merger Regulation. The Guidance encourages the EU Member States to refer certain transactions to the Commission even if the transaction is not notifiable under the laws of the referring Member State(s). In Q2, not long after the issuance of the Guidance, the Commission received its first referral request to assess the proposed acquisition of GRAIL by Illumina. In light of the growing global debate on the need for more effective merger control, EU Competition Commissioner Margrethe Vestager confirmed that the Commission will not soften EU merger policy going forward. The Commission’s statement was made despite the fact no deals have been blocked by the Commission in about the last two years.

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European Commission and National Authorities Take a Stand Against Excessive Pricing by the Pharmaceutical Industry

The European Commission and national competition authorities (NCAs) are very actively fighting a number of anticompetitive practices in the pharmaceutical industry. Enforcing the prohibition against excessive pricing has become a particular area of focus for competition authorities in Europe.

The European approach to excessive pricing differs from that followed in the United States, where excessive pricing does not amount to a violation of antitrust laws.

In the European Union (and the United Kingdom, for now), dominant businesses are not allowed to directly nor indirectly impose unfair purchase or selling prices. The Court of Justice of the European Union (CJEU) has established a two-pronged test for use in investigating excessive pricing. It must be determined i) whether the difference between costs actually incurred and the price actually charged is excessive, and, if yes, ii) whether or not a price has been imposed that is either unfair in itself or when compared to competing products.

In practice, competition authorities have historically been wary of prosecuting excessive pricing, partly because they do not want to act like price regulators, and partly because it can be difficult for an authority to establish that a price is excessive. In the last couple of years, however, the Commission and several NCAs have overcome their reticence.

Click here to read the full article in our latest International News.




Antitrust M&A Snapshot | Q1 2021

As the United States rounds the corner toward getting the COVID-19 epidemic under control within its borders, the US antitrust enforcers have seen a major spike in Hart-Scott-Rodino (HSR) premerger filings. In addition, the healthcare and technology industries can expect to remain under close watch by US enforcement agencies as the Biden administration continues to appoint progressive antitrust scholars to key leadership and advisory roles. And for the first time in many decades, the FTC has filed suit to block a vertical merger, indicating a more aggressive posture towards vertical transactions.

Meanwhile, the European Commission is focusing on “green killer acquisitions,” highlighting the interplay between the EU competition rules and the European Union’s environmental protection objectives. The Commission also published its evaluation of the functioning of the EU merger control rules in light of rapidly changing market realities. And in parallel with the publication of its evaluation findings, the Commission issued practical guidance that has the potential to create meaningful new transaction risk for mergers by subjecting more deals to in-depth Commission review.

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New European Commission Guidance Acquisitions of Nascent Competitors on the Radar

The European Commission wants to be able to block or conditionally approve transactions, mainly in the digital economy and in the pharmaceutical sector, even when the thresholds for notification are not met. In publishing its new Article 22 Guidance, the Commission has significantly expanded its ability to review transactions. Parties to a transaction, especially in the digital economy and in the pharma sector, should bear this in mind when strategising on deal timing and any potential remedies. They will also have to take into account the possibility that the transaction will be blocked. For third parties, this opens another possibility to stop a transaction, to extract remedies from the notifying parties or to even roll back an implemented transaction.

What Happened

  • Article 22 of the EU Merger Regulation (EUMR) allows for one or more Member States to request the Commission to examine any merger that does not have an EU dimension but meets the following cumulative conditions: it affects trade between Member States, and it threatens to significantly affect competition within the territory of the Member State or States making the request (Article 22 Conditions). Fulfilment of the Article 22 Conditions ensures that a merger has a sufficient nexus with the European Union and the referring Member State(s).
  • Traditionally, the Commission has discouraged the use of Article 22 EUMR in merger cases that were not notifiable under the laws of the referring Member State(s). This is principally because the Commission considered such transactions unlikely to have a significant impact on the internal market.
  • Recently, however, there has been an increase in the number of mergers involving companies that play, or may develop into playing, a significant competitive role on the market, despite generating little or no turnover at the time of the merger. This development has been found to be particularly significant in the digital economy, where services regularly launch with the aim of building up a significant user base and/or commercially valuable data inventories, before the business is monetised, and in the pharma sector, where transactions have involved innovative companies conducting R&D with strong competitive potential, even if such companies have not yet finalised, let alone exploited commercially, the results of their R&D activities. Because of the absence of, or low, turnover of one the parties to such transactions, they invariably escape assessment under national merger control rules.
  • With a view ensuring that non-notifiable yet potentially problematic mergers do not fly under the radar of merger control review, on 26 March 2021 the Commission issued practical guidance (Article 22 Guidance) on when it might be appropriate for a Member State to refer such mergers to the Commission for merger control review.

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Antitrust M&A Snapshot | Q4 2020

In the United States, despite initial obstacles because of the COVID-19 pandemic, 2020 rounded out to be the busiest year for mergers and acquisitions (M&A) enforcement in nearly two decades. In the fourth quarter, US agencies challenged five transactions. November 2020 saw the most premerger filings in any month since 2001. Mergers and filings in the United States are predicted to remain at high levels into the new year in light of the current economic climate. The antitrust agencies have continued to maintain that their evaluation and investigation of anticompetitive harm will remain rigorous despite the uncertain times.

In Europe, the European Commission (EC) and the UK Competition and Markets Authority (CMA) had a busy last quarter of 2020. The EC completed several in-depth investigations, including the Fiat Chrysler/Peugeot merger. The EC approved this transaction with behavioural remedies. With respect to policy and legislative developments, the EC published the much-anticipated draft of the Digital Markets Act, which is intended to regulate the market behaviour of large online platforms which act as “gatekeepers” in digital markets. Given the end of the transition period for the United Kingdom’s exit from the European Union, the CMA published a guidance paper explaining how it will conduct its work following Brexit.

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Annual European Competition Review 2020

McDermott’s Annual European Competition Review summarizes significant developments in the field of European competition law. 2020 saw several important legislative and policy developments, including EC guidance on foreign direct investment, the promulgation of a temporary framework for antitrust cooperation in the context of COVID-19 and the issuance of a rare competition law comfort letter thereunder. Furthermore, in addition to a number of interesting EC decisions, key judgments were handed down by the EU Courts, including in relation to the conditions for assessing “by object” infringements, the notion of “gun jumping” and jurisdiction under the EU merger regulation and tax planning measures under EU State aid rules. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.

In our super-connected age, because we are inundated with information from numerous sources it can be difficult to select what is really relevant to one’s business. The purpose of this review is therefore to help general counsel and their teams to be aware of, and to conduct their business in line with, essential EU competition law developments.

This review was prepared by McDermott’s European Competition Team in Brussels. Throughout 2020 they have monitored legal developments and drafted the summary reports.

Click here to read the full Review.




European Commissions Continues to Amend COVID-19 Temporary State Aid Framework

On January 28 2021, the European Commission (Commission) amended its COVID-19 Temporary State aid Framework (Temporary Framework) for the fifth time. The Commission adopted the Temporary Framework at the beginning of the COVID-19 crisis (March 19 2020) to support the economy and help Member States set up various aid measures. Since the adoption of the Temporary Framework, the Commission has approved hundreds of national COVID-19 support measures.

Given that the COVID-19 crisis continues to affect the European economy, the European Commission adopted a fifth Amendment to the Temporary Framework, which includes the following changes:

  • Extension of the Temporary Framework until December 31 2021;
  • Higher aid ceilings regarding limited amounts of aid and support for uncovered fixed costs;
  • Clarifications and amendments to several provisions.
  • The continued temporary removal of all countries from the “marketable risk” country list under the STEC (Short Term Export Credit) insurance Communication.

Our latest alert summarizes the key takeaways and immediate impact of this amendment.

*Author, Partner Hendrik Viaene, recently joined McDermott from Deloitte Legal, where he led the global Centre of Expertise in Competition and Regulatory Law. His practice focuses on EU competition and regulatory law, and he demonstrates in particular an in-depth technical skill and encyclopaedic knowledge of State Aid issues.

A seasoned and skilled litigator, he has successfully represented numerous clients before the European Court of Justice and Belgian courts. His practice additionally covers cartels, licensing agreements, merger control, abuse of dominance, and distribution agreements. His wide-ranging expertise extends over a number of sectors, including energy, chemicals and paints, automotive, financial data, recycling and waste management, telecoms, construction, renewables, media, private equity and the financial industry.

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Antitrust M&A Snapshot | Q3 2020

In the United States, mergers and acquisitions appear to be bouncing back after a muted start to the year due to COVID-19. Hart-Scott-Rodino (HSR) filings in Q3 2020 were up significantly over Q2, but still down from the mergers & acquisitions (M&A) boom we saw in Q3 and Q4 of 2019. Against the backdrop of a pandemic, we also saw significant developments in the approaches taken by the Federal Trade Commission (FTC) and Department of Justice (DOJ) in reviewing proposed acquisitions. The FTC has recently announced an intention to expand its retrospective analysis of consummated mergers; DOJ has restructured its merger review operations to reflect changes in how the economy operates and to allow the regulator to further specialize its review efforts; and the regulators jointly proposed amendments to the HSR premerger notification regulations that are likely to increase the number of filings required for private equity organizations.

In Europe, as a result of the ongoing pandemic, the European Commission (EC) received a lower number of notifications (78) compared to the same period in 2018 and 2019 (106 and 116 respectively). In August, however, the number of notifications made to the EC returned to a level that has been seen in previous years (30). That being said, in September, the number of notifications fell again (24). In terms of key cases, the EC approved the acquisition of Bombardier Transportation by Alstom. With respect to policy and legislative developments, the EC announced a new policy of accepting referrals from national competition authorities in cases where the national thresholds for notification have not been met. This new policy is expected to be implemented by mid-2021. The EC also plans to introduce changes to the merger control procedural rules with a view to bringing more deals within the ambit of the EC’s simplified procedure, and to reduce the amount of information that parties are required to provide.

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European Commission Announces New Approach to Merger Review Referrals Falling Below Thresholds

Under current EU merger control rules, whether a concentration has to be notified to the European Commission (“Commission”) depends, among other things, on the level of revenue generated by the parties worldwide and in the European Union.  A key question that has sparked considerable debate in recent years is whether the current merger control thresholds cover all transactions that have the potential to harm competition, or whether there is a so-called “enforcement gap”.

On September 11, during the International Bar Association’s 24th Annual Competition Conference, Competition Commissioner Margrethe Vestager announced that the Commission intends to change its approach towards referrals to the EU from national competition authorities. Commissioner Vestager noted that although the current, revenue-based thresholds set out in the EU Merger Regulation generally work well, revenue does not always reflect a company’s significance – particularly in innovative sectors, such as the pharmaceutical and digital sectors. In other words, innovative firms with low revenues may have a significantly out-sized market presence.

This issue is not entirely new, and has been debated in recent years – for example, in connection with possibly amending the thresholds set out in the EU Merger Regulation.  On this point, however, Commissioner Vestager pointed out that “changing the merger regulation, to add a new threshold like this, doesn’t seem like the most proportionate solution”.

Instead, as a solution to this shortfall, Commissioner Vestager stated that the Commission intends to broaden its approach to cases referred to it from one or more EU Member States, stating that the Commission will “[…] start accepting referrals from national competition authorities of mergers that are worth reviewing at the EU level – whether or not those authorities had the power to review the case themselves”.

The current referral system set out in the EU Merger Regulation enables the Commission to review concentrations that fall below the EU thresholds. Indeed, in recent years, certain significant transactions have been reviewed by the Commission only after an upward referral, as they did not fulfil the jurisdictional thresholds of the EU Merger Regulation, including for example Apple/Shazam (2018), Microsoft/GitHub (2018) and Facebook/WhatsApp (2014). Under the current rules, the Commission can review transactions which fall below the EU merger control thresholds on the basis of referrals from national competition authorities where:

  • the concentration is notifiable in at least three Member States; or
  • where the concentration affects trade between Member States and threatens to significantly affect competition within the Member State(s) making the request for a referral.

The Commission has discouraged national competition authorities from referring cases to the Commission  in instances when they themselves did not have the power to review because national merger control thresholds were not met.

The proposal announced by Commissioner Vestager would change this approach, and would allow a broader universe of cases – including those which fall below national thresholds – to be referred to the Commission.  Ms. Vestager explained that “those referrals could be an excellent way to see the mergers that matter at a European scale, but [...]

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