On 8 April 2019, the Irish Competition and Consumer Protection Commission ("CCPC") secured for the first time a criminal prosecution for "gun jumping" in a merger control case after Armalou Holdings Limited pleaded guilty to implementing a transaction in contravention of the requirement to first obtain regulatory approval.

In this update, we discuss how the CCPC's action in this case reflects a broader trend among competition authorities in a number of jurisdictions to focus increasingly on compliance with procedural aspects of merger control rules.

Gun Jumping

The CCPC's investigation of Armalou began in 2017 and related to a suspected failure by Armalou to notify its acquisition of Lillis-O'Donnell Motor Company Limited through its wholly-owned subsidiary, Spirit Ford Limited. Following extensive enquiries by the CCPC, the case was brought before the District Court, which found that Armalou had infringed the Irish merger control rules by carrying out the acquisition without the required prior notification to the CCPC. However, the Court found that Armalou was unaware of its obligations and had not engaged in a wilful breach. In those circumstances, and in light of its guilty plea, Armalou escaped significant sanction and was required only to make a charitable donation of €2,000.

This is well below the maximum potential sanctions that may be imposed under Irish merger control rules, which provide that parties found guilty of failing to make a required notification to the CCPC (or failing to provide information required by the CCPC pursuant to a request for information) may be subject to a fine of up to €250,000 and may also face an additional daily fine of up to €25,000 for each day of non-compliance.

Nevertheless, the case appears to represent a hardening of the CCPC's position on procedural violations. Speaking in the aftermath of the decision, Isolde Goggin, Chairperson of the CCPC, noted:

"Today's hearing is a strong reminder to businesses and legal practitioners, that failing to notify a notifiable transaction is a criminal offence and it is essential that merging parties comply."

The CCPC is not alone in ramping up its focus on "gun jumping". The European Commission ("Commission") decision in April 2018 to impose a €124.5 million fine on Altice for early implementation of its acquisition of PT Portugal and the Commission's ongoing investigation into similar activity in relation to Canon's acquisition of Toshiba Medical Systems Corporation are evidence of this trend. Similarly, the French Competition Authority has also intensified its activity in this area, having imposed fines of €80 million on Altice and SFR in 2016 for "gun jumping" in relation to two separate transactions.

These cases clearly signal that competition authorities are likely to continue to actively enforce this aspect of the merger control rules in future.

Other Procedural Violations

Aside from "gun jumping", competition authorities have also been clamping down on violations of other procedural aspects of merger reviews. In particular, regulators have pursued a number of cases involving the provision of incorrect or misleading information.

On 8 April 2018, the Commission fined General Electric €52 million for providing incorrect information during the Commission's investigation under the EU Merger Regulation of GE's planned acquisition of LM Wind. Specifically, the Commission found that GE had failed to disclose information concerning its research and development activities and the development of a specific product, which had consequences not only for the Commission's assessment of GE's acquisition of LM Wind but also for the parallel assessment of Siemens' acquisition of Gamesa.
That case followed a €110 million fine against Facebook in 2017 for the same infringement during the Commission's review of the Facebook/WhatsApp merger when Facebook informed the Commission that it would be unable to establish reliable automated matching between Facebook users' accounts and WhatsApp users' accounts, despite knowing at that time that the technical possibility of such matching existed and the later integration of the two services on this basis.

Similarly, the UK Competition and Markets Authority ("CMA") has also shown a willingness to bring enforcement action in relation to procedural infringements under the UK merger control rules. For example, in November 2017, the CMA imposed a fine of £20,000 on Hungryhouse for failure to disclose documents that were responsive to a formal request for information during the CMA's investigation of Just Eat's acquisition of Hungryhouse.

These cases demonstrate that regulators are taking an increasingly strict approach to infringements of the rules during merger review processes. Merging parties therefore need to take the utmost care in ensuring the completeness and accuracy of information that is provided to competition authorities.

In addition, the statement of objections sent by the Commission to Telefónica Deutschland on 22 February 2019, alleging a breach of the commitments entered into to secure approval for the acquisition of E-Plus in 2014, shows that the need to ensure compliance with procedural rules can continue even after the formal merger review process has been completed.

Regulators Beware

While the cases above suggest that competition authorities are applying increasingly high levels of procedural scrutiny in all areas, it is not all one-way traffic and there have been a number of significant decisions from the European courts clarifying important issues of procedure for competition authorities.

Of most interest in this respect was the decision of the Court of Justice of the European Union ("CJEU") confirming that the Commission's decision prohibiting the acquisition of TNT Express by UPS had to be annulled due to procedural irregularity. Specifically, the CJEU upheld the earlier judgment of the General Court in which the latter had found that UPS's rights of defence had been infringed in circumstances where the econometric models used by the Commission as a basis for its prohibition decision differed to a considerable degree from the models the Commission had disclosed to UPS during the merger review.

Nor is this is an isolated incident. The European courts have shown on a number of other occasions recently that the Commission will be held to the same standard. For example, the General Court's decision annulling the Commission's approval of Liberty Global's acquisition of Ziggo. Therefore, competition authorities must likewise ensure that their procedures are able to withstand judicial scrutiny.

Concluding Remarks

It is clear that competition authorities in Ireland and elsewhere are placing significant emphasis on ensuring compliance with procedural rules in merger cases and that parties will be held accountable for any failures in this respect. While substantive issues often attract the most attention, businesses should ensure they take steps to comply with the procedural elements of merger reviews by competition authorities.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.