Recent EU Decisions Highlight Risks of “Gun Jumping”

August 14, 2014

The European Commission (“the Commission”) last month levied a fine of EUR 20 million on Marine Harvest ASA (“Marine Harvest”), a Norwegian seafood company, for acquiring a 48.5% stake in its competitor Morpol ASA (“Morpol”) prior to notifying the transaction to the Commission and receiving its approval. Earlier that month the European Court of Justice (“ECJ”) upheld a Commission fine of EUR 20 million on Belgian energy company Electrabel for failure to notify the increase of its stake in the French electricity company Compagnie Nationale du Rhône (“CNR”) from 17.86% to 49.95%. In both cases, acquisitions of below 50% shareholdings were deemed to be reportable under the EU Merger Regulation (“EUMR”) on grounds that they conferred on the acquirers de facto sole control over the respective target companies.

The Marine Harvest case is a stark reminder that the Commission is prepared to impose significant penalties on companies that breach their obligations (i) to notify transactions that fall within the scope of the EUMR (notification requirement), and (ii) to refrain from closing such transactions before merger control clearance is granted (standstill obligation). Following Electrabel, it is clear that it has the European Courts’ blessing to do so. Under the EUMR, fines for “gun jumping” can reach 10% of the annual worldwide turnover of the corporate group to which a company belongs.

Companies should therefore assess the merger control implications of envisaged transactions already at an early stage in the process and make sure that procedural and substantive risks are adequately addressed. This is particularly true when a notification requirement cannot be determined on the basis of a bright line test, but rather as in the case of de facto sole control, careful consideration of a number of transaction-specific factors is warranted.

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