Commission's decision on Altice’s gun jumping upheld by General Court

On 24 April 2018, the European Commission (Commission) fined Altice €124.5 million for (i) on the one hand, having implemented its acquisition of PT Portugal before it was notified and (ii) on the other hand, having implemented this acquisition before it was approved. See our website for our article on this Decision.

Altice appealed this Decision before the General Court, arguing principally:

• firstly, that the pre-closing covenants ("preparatory clauses") of the Share Purchase Agreement in question did not in fact result in early implementation in breach of the gun jumping prohibition; and
• secondly, that the double infringement was "redundant", disproportionate and in breach of the principle of no double punishment.

The General Court’s ruling

The General Court rejected Altice’s arguments¹. It ruled in respect of the first argument:

• that in reference to the Ernst & Young Judgment of the EU Court of Justice², the key element of gun jumping is not the effective early implementation of the transaction, but in fact any action that (partially or completely) confers control (ie the ability to exercise decisive influence);
• that the pre-closing covenants gave Altice the ability to exercise decisive influence over PT Portugal before closing, and were not just ancillary or preparatory to the transaction;
• that, in practice, Altice had exercised decisive influence over PT Portugal before approval and even before notification through (i) Altice’s involvement in various activities considered part of the normal course of business, such as prior consent for the launch of a publicity campaign, involvement in the renegotiation of contracts and other commercial activities, requesting PT Portugal to increase its shareholding in the national telecommunications network and prior approval of certain investments relating to a tender for the provision of services and outsourcing solutions, and (ii) the exchange of commercially sensitive information post-signing; and
• that the European Commission’s application of the gun jumping prohibition did not infringe the legal certainty principle (nullum crimen, nulla poena sine lege), finding that the gun jumping prohibition provisions in the Merger regulation should have been sufficiently clear for Altice to know that the pre-closing covenants were in breach.

As regards the second argument, the General Court referred to the Marine Harvest case³ in which the ne bis in idem principle in the context of a cumulation of fines for failure to notify and for implementation before approval, was rejected. It ruled in this respect that the reference to the principle of the prohibition of double punishment concerned a similar argument and should be rejected for the same reasons. The General Court also rejected that the cumulation was disproportional.

Finally, the General Court ruled that the fine imposed was lawful and proportionate, but nevertheless applied a reduction of 10% to the part of the fine relating to the failure to notify, to reward Altice for having informed the Commission of the transaction (and having sent a case-team allocation request) on its own initiative and well before the signing of the Share Purchase Agreement.

Conclusion

Once again, companies are reminded of the importance of (i) properly identifying the jurisdictions in which a transaction has to be notified to prevent a fine for failure to notify, and (ii) ensuring compliance with the standstill obligation to prevent a fine for implementation pre-approval. Parties to an M&A transaction should in particular be careful to ensure that pre-closing covenants do not confer (partial) control of the buyer over the target. This means that these covenants should not:

• go beyond what is objectively necessary to preserve the value of the target; and
• imply any influence of the buyer over the target relating to activities that are in the ordinary course of business.

Parties to a transaction should in any event ensure that they continue to conduct their respective businesses separately and independently until approval.

¹ Judgment of the Court of 22 September 2021, Altice v Commission, T-425/18
² Judgment of the Court of 31 May 2018, Ernst & Young P/S v Konkurrencerådet, C-633/16
³ Judgment of the Court of 4 March 2020, Marine Harvest v Commission, C-10/18 P