Competition Law and M&A: The European Commission’s Landmark Gun-Jumping Fine on Altice of €124.5 Million Puts Spotlight on Covenants in Transaction Agreements

Sullivan & Cromwell LLP - April 26, 2018

The European Commission (“EC”) on Tuesday fined Altice, a Netherlands-based cable and communication company, €124.5 million for implementing its acquisition of PT Portugal before receiving merger control approval. This is a significant development for gun-jumping case law in Europe because it is the first time the EC has taken issue with the wording of pre-closing covenants in a transaction agreement. The decision also illustrates the significant risks of information exchanges in an M&A context without adequate confidentiality arrangements. The fine is the highest ever for infringement of EU merger control rules – six times higher than the EC’s €20 million fine for each of Electrabel’s and Marine Harvest’s gun-jumping infringements.

Tuesday’s decision comes in the wake of increased EC scrutiny of “procedural” non-compliance and firmly puts the spotlight on merging parties’ pre-closing conduct. The EC’s firm stand is a reminder for merging parties and their advisors to ensure compliance with applicable merger control rules, in particular with respect to pre-closing covenants, integration planning, and information exchanges prior to merger control approval and closing. While the U.S. agencies have traditionally been more active than the EC in detecting and punishing pre-closing conduct, including the buyer’s interference in the target’s ordinary course of business, the Altice decision shows the EC’s determination in this context and may lead to increased enforcement by national competition authorities in the EU and beyond.