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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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COVID-19 and EU Competition Proceedings: Extraordinary Times Call for Extraordinary Measures

In the midst of the ongoing global effort to mitigate the effects of COVID-19, the Directorate-General for Competition (DG Competition) of the European Commission (EC) and the EU courts are taking measures to prevent the spread of the virus among individuals whilst at the same time seeking to ensure that the EU economy remains as stable as possible. The situation remains highly fluid for the foreseeable future. Companies are therefore urged to stay abreast of the continually changing measures being taken.

WHAT HAPPENED

EC Staff working on “non-essential” projects are working remotely from home. However, officials who hold “critical” functions, such as the Commissioner, the Director-General and Heads of Unit, will generally be present at DG Competition, although working on a shift basis. In-person meetings will be replaced by video conferences going forward. DG Competition staff who are dealing with the provision of State aid exemptions during the crisis are being considered “critical”.

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Antitrust M&A Snapshot | FTC and DOJ Continue M&A Transaction Investigation While UK CMA Continues Role as Key Jurisdiction in Merger Clearance Process

Antitrust regulators in the United States and Europe were very active in the final quarter of 2019. The FTC and DOJ continue to investigate and challenge M&A transactions in a variety of industries. Events of this quarter highlight the importance of states in merger enforcement. As well, recent FTC activity highlights the regulators’ focus on preventing monopolists from buying nascent competitors.

In Europe, the UK CMA continues to expand its role as a key jurisdiction in the merger clearance process, which will only accelerate with Brexit. The EC agreed to clear, subject to conditions, acquisitions in the aluminum production and battery industries as well as in the wholesale supply and retail distribution of TV channels after conducting Phase II reviews. Moreover, the EC opened new in-depth investigations into transactions in the copper refining and engineering sectors.

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Interim Measures Imposed on Broadcom: The Re-Awakening of a Once-Dormant Tool?

The European Commission (EC) has found, on a prima facie basis, that Broadcom abused its dominant position. In order to avert the risk of serious and irreparable damage to competition, Broadcom has been ordered to cease its prima facie abusive conduct with almost immediate effect. This is the first time in 18 years that the EC has made use of such measure and could signal the re-awakening of a once-dormant tool.

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EU Competition Commissioner Vestager Nominated for a Second Term – a Tale of Two Hats

What Happened:

On 10 September 2019, European Commission President-elect Ursula von der Leyen nominated Margrethe Vestager as Competition Commissioner for a second consecutive term. As part of a structural shake-up of the Commission, involving the institution of eight Vice-Presidents, three of whom will be “Executive Vice Presidents”, she will additionally serve as “Executive Vice President for a Europe fit for the Digital Age”. As head of the competition portfolio Ms. Vestager will be supported by DG-Comp. As chief coordinator of the digital portfolio she will be supported by the Commission’s Secretariat-General. With respect to the latter role in particular, Ms. Vestager will be charged with ensuring that “Europe fully grasps the potential of the digital age and strengthens its industry and innovation capacity” and will be responsible for specific initiatives including new laws governing digital platforms and a potential tax on digital companies. Subject to European Parliament consent, which is expected to be given, she will carry out this dual rule until 2024.

What This Means:

Ms. Vestager’s mission as Competition Commissioner will be based on the following priority actions:

  1. Strengthening competition enforcement in all sectors: this tenet focuses on improving case detection, expediting investigations and facilitating cooperation with and between EU national competition authorities, including global cooperation among competition authorities.
  2. Evaluate and review Europe’s competition rules: this will cover antitrust regulations that are due to expire during her mandate (e.g. the Verticals Block Exemption Regulation (Reg. 330/2010), the ongoing review of the merger control rules and the review of State aid rules and guidance.
  3. Use of the sector inquiry instrument in new and emerging markets: in the context of new and emerging markets, sector inquiries will be carried out in markets that the Commission believes are not working as well as they should, and that breaches of the antitrust rules might be a contributory factor. Ms. Vestager already presided over the Commission’s sector inquiry into the e-commerce sector in 2015.
  4. Develop tools and policies to address the distortive effects linked to state-owned companies or subsidized companies from outside the EU but operating in the EU.

While it is somewhat unusual for a Competition Commissioner to be re-elected for a second term, her re-nomination serves as a testament to widespread appreciation for her unwavering commitment to ensuring consumer welfare. That being said, and against the Commissioner’s mandate to secure enhanced global cooperation amongst competition authorities, the move will likely raise eyebrows on Capitol Hill. This is principally because of Ms. Vestager’s alleged crusade against many of the biggest U.S. tech companies, a path likely to be pursued during the Commissioner’s second term in office. Indeed, her mandate over rule-making related to the digital economy could also give her increased influence over global tech regulation. Furthermore, her mission appears to be heavily influenced by the fall-out of the failed Alstom/Siemens railway merger. It will be interesting to see, for example, what role, if any, industrial policy will play under the EU Merger Regulation going forward. With Ms. Vestager’s focus [...]

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Antitrust M&A Snapshot | US Agencies Aggressive While the EC Publishes Report on Competition Policy for the Digital Era

The second quarter of 2019 proved to be a busy season for antitrust matters. In the United States, agencies continued to be aggressive and blocked transactions or required significant remedies. They cleared three mergers where divestitures were required; and in the face of FTC or DOJ opposition, companies abandoned several transactions, including between Republic National Distribution Company and Breakthru Beverage Group. Regarding vertical transactions, we continued to see a split between the FTC Republican and Democratic Commissioners regarding whether enforcement is required and the appropriate remedies.

In the European Union, the EC published a report on competition policy for the digital era, which deals with, among other things, acquisitions of nascent competitors. The EC also closed two merger control proceedings subject to divestitures, blocked a proposed joint venture, and showed that it will seek large fines for companies violating EU competition rules for merger notifications.

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Antitrust M&A Snapshot | US Tackles Vertical Merger Enforcement Guidelines while the EC Blocks 2 Transactions

The first quarter of 2019 proved to be as active as ever for antitrust regulators in both the United States and Europe. In the United States, vertical merger enforcement was the focus of a few high-profile matters. The US DOJ has been working on an update to the Non-Horizontal Merger Guidelines, possibly providing clarification for merging parties.

Meanwhile in Europe, although the European Commission cleared a number of merger control proceedings with remedies, the European Commission also blocked two transactions during the first quarter of 2019.

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Hélène de Cazotte, a trainee in the Firm’s Brussels office, also contributed to this publication.




Antitrust M&A Snapshot | Regulator Focus on High-Tech Transactions, Acquisitions and Impact on Innovations

Antitrust regulators in the United States and Europe were very active in the final quarter of 2018 closing a large number of cases requiring in-depth investigations. In the United States, regulators continue their focus on the potential need to update their methods of reviewing high-tech transactions with public hearings on the future of antitrust enforcement.

In Europe, recent reviews of Takeda’s acquisition of Shire and the creation of a joint venture between Daimler and BMW show a focus on how transactions will impact innovation for new products.

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EU Court of Justice Confirms Annulment of Commission Prohibition Decision Due to a Procedural Irregularity

On 16 January 2019, the Court of Justice of the European Union (CJEU) dismissed the appeal by the European Commission (Commission) against the 2017 judgment of the General Court of the European Union (GCEU). This annuls the Commission’s decision to block the proposed acquisition of TNT Express NV (TNT) by United Parcel Services (UPS) in its entirety (C-265/17 P). The judgment reminds the Commission that it must maintain a balance between the need for speed and the observance of the rights of the defence in merger proceedings.

IN DEPTH

Background

By decision on 30 January 2013, the Commission blocked the proposed acquisition of TNT by UPS (Case M.6570).

On 7 March 2017, the GCEU annulled the Commission’s decision in its entirety on the grounds that (i) the Commission infringed UPS’s rights of defence by failing to communicate to UPS the final version of an econometric model on which it relied in its prohibition decision and that (ii) UPS might have been better able to defend itself if it had at its disposal the final version of that model.

The Commission challenged the GCEU judgment before the CJEU. First, the Commission argued that it was not required to communicate the final econometric analysis to UPS. Second, the Commission claimed that even if UPS’s rights of the defence had been infringed, the GCEU should have dismissed UPS’s plea alleging infringement of the rights of the defence as ineffective because a significant impediment to effective competition (“SIEC”) could in any event be established in Denmark and the Netherlands without having to rely on the econometric model concerned.

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Bigger Is Better. . .Or Maybe Not: The Siemens/Alstom Railway Merger

The European Commission recently reaffirmed that industrial policy objectives have no role to play when it comes to applying the EU merger control rules. Despite unusually intense industrial and political pressure to get the Siemens/Alstom railway merger done, Competition Commissioner Vestager has forcefully reiterated that the substantive test under the EU Merger Regulation remains exclusively competition based.

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