Another milestone judgment in EU merger control: General Court upholds EC position on gun-jumping by Altice

Although the transaction was notified to the Commission in February 2015 and approved, subject to conditions, in April 2015, the Commission became aware through the press of a possible violation by Altice of the standstill obligation under the EUMR.

An investigation by the Commission was launched, and the Commission found Altice to have partially implemented its acquisition of PT before obtaining the Commission’s clearance, and in some instances, even before its notification of the transaction. By doing so, the Commission imposed a fine on Altice for breaching Articles 4(1) and 7(1) EUMR.

Altice brought an action on 5 July 2018 to the General Court (“GC”) challenging the Commission’s decision.

Key takeaways from GC’s judgment

By way of its judgment of 22 September 2021 in Case T‑425/18, the GC upholds the Commission’s position. The GC’s ruling provides guidance on a number of key legal issues:

• Article 4(1) and Article 7(1) of EUMR pursue autonomous objectives –With these two provisions, the EUMR seeks to enable two autonomous objectives to be attained in the context of the ‘one-stop shop’ system. Consequently, in the present case, where an undertaking notifies a concentration prior to implementing it pursuant to Article 4(1) EUMR, it remains possible for that undertaking to infringe Article 7(1) of that regulation if it implements that concentration before the Commission declares it compatible with the internal market.
  
  
• The purchasing agreement included covenants empowering Altice with the possibility of exercising control over PT prior to closing – The GC acknowledged that the standstill obligation does not prohibit pre-closing covenants which are necessary to (i) ensure that the value of the target is preserved, or (ii) to avoid compromising the commercial integrity of the target. However, the GC found that the restrictive covenants which granted Altice with the possibility of exercising decisive influence prior to closing were overly broad and were not necessary to maintain the value of PT’s business. The pre-closing covenants enabled Altice to influence decisions related to three areas:
  
  
  • PT’s senior management and its appointment, dismissal or changes to their contracts.
  • Changes to PT’s pricing policy and standard terms and conditions.
  • Entering, terminating or modifying a wide range of PT’s contracts.
    
    
• The mere possibility to exercise decisive influence prior to the closing of a concentration constitutes gun-jumping – The GC found that covenants that are so broad as to go beyond the protection of the value of the target and lead to “the mere possibility” for an acquirer to exercise decisive influence over the target pre-closing, constitute gun-jumping.
  
  
• Several instances where information exchanges contributed to the finding that decisive influence was exercised – The GC upheld the Commission’s position in finding that there were several instances where Altice had actually exercised decisive influence by interfering in PT’s ordinary course of business. For example, Altice gave instructions to PT regarding a promotional campaign, it advised PT on the strategy for selecting certain suppliers, and advised PT during negotiations with an important business partner, Altice requested and received highly commercially sensitive information from PT, etc.

Finally, the GC did agree to a 10% reduction of Altice’s fine related to the failure to notify the deal in time, since Altice had warned the commission of the transaction in advance. The GC hereby reduced the Commission’s fine on Altice from 124.5 million to 118.2 million euros. That being said, the fine remains the highest by the Commission for gun-jumping. It is not known whether Altice will appeal the GC’s judgment.

With other cases on gun jumping looming, the GC’s ruling in Altice sends a clear message on competition authorities’ trend of tougher stands on gun-jumping in the recent years.