For the first time ever, on 8 November 2016 the French Competition Authority (FCA) sanctioned companies for implementing a transaction that had been notified to the FCA but not yet received a clearance decision, behaviour commonly known as “gun-jumping”.

In Depth

The FCA has imposed a hefty fine of €80 million on Altice Luxembourg and SFR Group jointly and severally for implementing two proposed acquisitions in the telecommunications industry before obtaining the FCA’s clearance.

The FCA has previously imposed fines on companies for failing to notify a concentration, but never for gun-jumping, and the fines imposed up till now were relatively low. The high profiles enjoyed by the sanctioned companies, the very large amount of the fine, and the fact that there are only few previous gun-jumping cases in the world, all contribute to making the FCA’s decision in this case historic.

Background

In France, companies notifying a concentration to the FCA are required to wait for an authorisation decision before implementing a transaction. Under Article L. 430-8 II of the French Commercial Code, companies that fail to do so can be fined up to 5 per cent of their turnover.

This decision comes more than two years after the Altice group notified the FCA of its proposed acquisition of SFR, to be followed by the acquisition of the OTL group. The proposed acquisitions were approved by the FCA on, respectively, 30 October 2014 and 27 November 2014. In April 2015, after hearing industry rumors about gun-jumping, the FCA carried out dawn raids at the premises of all three companies, which confirmed its suspicions.

The FCA’s Decision

The FCA found that even though Altice had not acquired the targets’ assets during the waiting period, it had started exercising decisive influence over them. This, in turn, had enabled Altice to obtain access to sensitive information concerning its competitors, including their future intentions.

Altice’s top management had, for example, given the go-ahead to SFR to participate in a tender and to renegotiate a contract with a competitor. Altice had also influenced SFR’s commercial and pricing policies.

In addition, although initially SFR was supposed to acquire OTL, Altice and SFR had decided together that Altice would be better placed to take control of the group.

Finally, Altice and SFR had started to put into place a joint strategy for the launch of a new range of internet access services.

In relation to OTL, Altice had, for example, established a mechanism of weekly reporting that enabled it to closely follow OTL’s financial performance. In addition, the managing director of OTL had started to be integrated into SFR. 

The FCA’s decision has not yet been published but the Authority indicated in its press release that the amount of the fine is justified by

• The importance of the acquisitions in terms of purchase price and the impact on the telecommunications industry.

• The breadth, duration and deliberate nature of the conduct.

• The fact that Altice engaged in gun jumping not just once, but twice.

Altice and SFR benefitted from a reduction in the fine for waiving their right to challenge the FCA’s objections. This means that the parties are not entitled to appeal the decision on substantive grounds, i.e., by challenging the facts and their legal characterisation. Altice and SFR did, however, maintain the right to argue before the Paris Court of Appeal that the fine should be reduced.

Comment

This decision could turn out to be a textbook case of gun-jumping as it provides a broad overview of different types of behaviour that could be considered gun-jumping. In that respect, the FCA’s decision is useful for companies and investment funds as it provides guidance and legal certainty—especially in a context where there is very little guidance and very few decisions at the European Commission and national level—on what conduct to avoid before obtaining merger clearance from competition authorities.

Specifically, companies and investment funds that are notifying a concentration in France should be cautious not to start exercising influence over a target before obtaining the FCA’s approval.