Jay Modrall: Richard, it’s good to see you again. There have been a couple of major decisions since the last time we talked about gun-jumping. Would you like to outline the two new cases?
Richard Whish QC: Two cases: one is from Denmark – Ernst & Young/KPMG – where they were merging their Danish assets. That was a concentration under Danish law. It was notified to the Danish authority and in due course cleared, but between agreement and closure, KPMG Denmark took steps to extricate it from a global cooperation agreement of the KPMG group and the Danish authority came to the conclusion that that fact of extrication from the agreement amounted to implementation of the concentration and so they imposed a fine under the equivalent of Article 7 of the EU Merger Regulation, and that ended up on a reference under Article 267 to the Court of Justice. So, the Court of Justice, for the first time in history, had to give a ruling on Article 7 and what was meant by implementation of the concentration. And it drew a rather simple and elegant distinction, I believe, between on the one hand, the acquisition of control which is the mischief Article 7 is aimed at, and transactions that are ancillary to, or preparatory for, the acquisition of control, and they lie outside the scope of Article 7. Subsequently, on 7 September, the Danish authority has now concluded that there was no breach in that case. Altice, on the other hand, a Commission decision imposing a fine of €125 million, where the Commission said that Altice was acquiring control of Portugal Telecom and that the agreements in question gave it the ability to control PT, and that on the facts of the case it had in fact exercised control over PT, and so imposed a fine of €125 million, and that case is now on appeal to the General Court.
Jay Modrall: A perennial issue in gun-jumping cases is the distinction between a breach of suspensory provisions like Article 7 of the Merger Regulation and conduct which needs to be assessed under Article 101 or its equivalents under other laws. How do these two cases clarify that line?
Richard Whish QC: Well, I think the Court of Justice in Ernst & Young does it very clearly and they say that, on the one hand, you’ve got Article 7, and the question there is has X acquired control of Y? Separately from that, in the interim period before X has acquired control of Y, these are independent undertakings and it is possible that things happen between them such as the exchange of information that could amount to an infringement of Article 101. Well, that’s a different kind of analysis and the Court is quite clear that these two things exist side by side.
Jay Modrall: Well, in fact the Commission, interestingly, in Altice considered, broadly speaking, two areas – one being the covenants requiring consent for Altice to take various actions during the pre-closing period – and the other, information exchange. In light of E&Y which was released after the Altice decision was adopted, do you think any of that decision should be reviewed?
Richard Whish QC: Well, we’ll have to wait and see because, obviously, these cases are very dependent on their own facts, and I think what was happening in KPMG/EY is profoundly different from what was happening in Altice/Portugal Telecom. Yes, it is true that the Commission adopted its decision pre-EY – who knows it might have written it differently if it had been deciding the case post-EY – but then Altice is on appeal, so the General Court, and I dare say, ultimately, the Court of Justice, will get to look at the Altice case and in a couple of years hopefully the two things will fit together.
Jay Modrall: These cases are both very, very new in EU law, what are the main takeaways do you think for M&A lawyers?
Richard Whish QC: Well, I notice in Altice in particular, I have to say I was a little bit surprised to read that there was no non-disclosure agreement in that case. There was no confidentiality agreement. There was no clean team put in place to safeguard what happened to the information, and so on and so forth. So, those are all precautions that I would have expected people to have taken in cases like that. A different point is when it comes to the covenants that are intended to protect the value of the business and so on and so forth. It’s an obvious point to make, but a very important one in practice, that it really is better to get the competition lawyers involved sooner rather than later because we’ve now seen the kind of difficulty that Altice got themselves into, not least a fine of €125 million.
Jay Modrall: Thank you very much, Richard.