Jay Modrall: Welcome to our discussion this afternoon of gun jumping which has become a very topical hot area in EU law recently. Gun jumping has been a well-known or common subject for all merging parties both in the EU and the US and in other suspensory jurisdictions, but it has not been a typical area of enforcement in the EU. Richard, why do you think there has been such a different practice in the EU verses the US for example?
Richard Whish: Well it’s interesting isn’t it, in the merger regulation we have two provisions, Article 4 paragraph 1 which requires pre-notification of mergers, Article 7 paragraph 1 which says that there’s a stance of obligation and one mustn’t begin to consummate the merger until there has been a clearance. And in terms of enforcement action, there can be fines both for infringement of Article 4 and Article 7. But to date, the only infringement decisions have been in relation to a failure to notify under Article 4. The Commission has never adopted a decision under Article 7. We know that there had been a few occasions when they have started investigations under Article 7, but it’s never preceded all the way to an actual infringement decision. I suppose one answer is that it’s much easier to establish an infringement of Article 4, did they notify or not? It isn’t clear what is meant by implementation, that’s obviously a much more complicated thing to determine, so we haven’t had a decision on Article 7 yet, but of course we now have two decisions, or two cases anyway, in the pipeline Altice and Canon, so let’s wait and see.
Jay Modrall: Can you describe briefly those two cases and what we might expect to learn from them?
Richard Whish: Altice is interesting because there Altice was purchasing Portugal Telecom from a Brazilian operator and there was a purchase agreement, and, in the Commission’s opinion, the influence that Altice was to obtain under the purchase agreement they started to exercise prior to clearance by the Commission, and even, as the Commission suggests, prior to notification of the merger, in circumstances where Altice did have subsidiaries who themselves were competing in Portugal with Portugal Telecoms. So, if this is the case one can well see why the Commission would consider it worthwhile investigating.
Jay Modrall: Altice may well have been on the Commission’s radar thanks to the French Competition Authority’s gun jumping decision against Altice earlier this year. The French authority has been severely criticised for being overly prescriptive in its decision regarding the kind of conduct that parties can and, importantly, cannot engage in prior to closing. How would you expect the Commission to deal with the tension between the need to give guidance on the one hand and the need to avoid being overly prescriptive and uncommercial on the other?
Richard Whish: My expectation would be that the Commission would decide the Altice case simply on the facts of the case and if it does identify acts that amount to implementation they will be set out in the decision and the decision will be addressed to Altice. But I don’t think this is the occasion on which, as it were to introduce guidelines on implementation through an individual decision. I think rather one needs a series of decisions establishing the decision or practice and then in the future one could perhaps distil guidelines from those decisions.
Jay Modrall: The Canon case, on the other hand, is very different dealing with a “critical warehousing situation”. Unlike the laws of many jurisdictions the merger regulation has a specific statutory basis for so-called “warehousing” involving a transfer of shares to a financial institution for up to a year without the need for notification. But the Commission has always been hostile to these kinds of structures. Why do you think the Commission has gone after this transaction now and how do you think it might affect…
Richard Whish: Well, I’ve been aware of this warehousing phenomenon for many years and I’ve often wondered when the Commission might choose to investigate a case. Here, we have an interim buyer that purchases, I think, 95 per cent of the shares for a nominal amount of money and Canon purchases 5 per cent of the shares plus share options for a very, very significant amount of money in the billions of dollars. In those circumstances, it looks to me like a good candidate case for investigation and again I think here let’s wait and see.
Jay Modrall: It may be helpful that the Canon transaction was the subject of gun jumping proceedings in other jurisdictions as well, which provides some support for the Commission going after them.