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Altice, Patrick Drahi’s Dutch multinational telecommunications and media company, may have violated European Union competition law by implementing a merger with PT Portugal before getting clearance, a practice called “gun jumping.”
Altice announced on May 18 that it has received a “statement of objections” about the deal from the EU competition commission. Objections are the first step in a formal charge against the company as part of an EU investigation. If Altice is found to have broken the law, it can be fined up to 10 percent of annual worldwide revenue.
The merger itself is not at risk, having been approved subject to conditions on April 20, 2015.
Worldwide, antitrust authorities are getting more serious about gun-jumping violations. Acting on a tie-up before it’s cleared can undermine merger-control laws that require parties to notify authorities about their pending deals. Then they must wait while regulators probe the competitive impacts.
The EU has brought three cases in recent years, and enforcement across Europe is stepping up. For example, Norway’s competition regulator fined NorgesGruppen almost 3 million euros for gun jumping in its acquisition of ICA Maxi grocery stores in 2014, and France fined Altice a record 80 million euros last year for gun jumping in a different merger.
“Companies will need to be careful,” said Juliette Goyer, Paris Counsel with White & Case LLP. “The parties must not complete mergers prematurely and must continue behaving independently until they obtain merger clearance.”
As these recent cases show, it is especially important not to exchange commercially sensitive information or exercise decisive control over the proposed target company, she said.
Altice got into trouble for exercising control in the most recent case. In December 2014, Altice agreed to buy PT Portugal from Oi, a Brazilian telecommunications operator. Altice notified the competition commission about the deal in February 2015. The commission objected that the purchase agreement put Altice in a position to immediately exercise decisive influence over PT Portugal. It also said Altice used that influence before authorities cleared the transaction.
“The purchase agreement between the two companies put Altice in a position to exercise decisive influence over PT Portugal before notification or clearance of the transaction,” the commission statement said. “In certain instances Altice actually exercised decisive influence over PT Portugal.”
In reviewing the actual deal, the European Commission said Altice would have too much market power in fixed telecommunications in Portugal. It required Altice to divest two subsidiaries that competed with PT Portugal in telecommunications services markets before clearing the merger. The EU has continued to investigate the alleged gun-jumping violation.
Altice said in a press release that it doesn’t agree with the European Commission’s preliminary conclusions and will submit a full response to the statement of objections and contest them.
Altice’s is only the third gun-jumping charge the EU has brought. The EU issued its first fine for gun jumping in 2009 against Belgian electric company Electrabel. It didn’t fine another merging party for overzealous integration until 2014, when Marine Harvest paid 20 million euros for buying an near-controlling share of rival salmon producer Morpol’s stock without notifying authorities.
Altice was also the target of the highest fine ever imposed in Europe for gun jumping on a different deal in November 2016.
The French competition authority fined Altice Luxembourg 80 million euros for implementing its merger with rival telecom operators SFR and OTL before France cleared the deal. Altice chose not to challenge the case and got a reduction in its fine as a result.
In the French case, Altice exchanged sensitive commercial information with its intended merger targets and even prepared for a joint bid to customers for roll-out immediately after closing—all before the French authorities had cleared the merger.
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