On November 8, 2016, the French Competition Authority (“FCA”) imposed the highest “gun-jumping” national and worldwide fine ever, €80 million, on Altice-Numericable, a major French telecommunications operator, in relation to its 2014 acquisitions of SFR (“Société Française du Radiotéléphone”) and OTL (“Omer Telecom Limited”).
“This is a world first decision when considering the amount of the sanction and the seriousness of the circumstances,” commented Isabelle de Silva, the President of the FCA since last October.
“The FCA is really concerned about delivering its merger decisions within an extremely short timeframe. There is no justification for companies to bypass the phase of antitrust analysis,” commented Bruno Lasserre, former President of the FCA.
Although the decision is not yet public, the FCA published a press release on November 8, 2016, reporting on the decision.
How did Altice-Numericable Jump the Gun?
In April 2015, after hearing industry rumors about gun-jumping, the FCA carried out dawn raids at the premises of Numericable, SFR and OTL. Although no assets were transferred during the waiting period to constitute gun-jumping, Altice started exercising decisive influence over the target companies:
- Altice gave a green light to SFR to participate in a tender for the development of a new fiber-optical network in the Seine-et-Marne department;
- Altice influenced SFR’s commercial policies and, critically, its pricing with regard to high-speed internet access offers;
- Altice took an active role in the renegotiation of a contract with one of SFR’s main competitors;
- Altice and SFR started to put in place a joint strategy for the launch of a new brand on the broadband market;
- Altice put in place a mechanism of weekly reporting to closely follow OTL’s financial performance; and
- The former CEO of OTL started to be integrated into the merged entity SFR-Numericable by being associated with new commercial projects of SFR and receiving commercially sensitive information.
Gun-Jumping Fine Explained
Under French Competition Law, the FCA may fine a party that has implemented a reportable transaction prior to receiving approval up to 5% of the acquiring company’s French turnover excluding tax, plus if need be, the target’s turnover.
The FCA has previously imposed fines on companies for failing to notify a concentration prior to its implementation, but never for gun-jumping, and the fines imposed until now have been relatively low. The highest fine of €4 million was imposed on the Castel Group for its failure to notify the acquisition of six wine producers in 2013.
The hefty fine of €80 million, the high profiles enjoyed by the sanctioned companies, and the fact that there are only few previous gun-jumping cases in the world, all contribute to making the FCA’s decision in this case historic.
In its press release, the FCA indicated that the large amount of the fine is justified by:
- The size of the operation and its impact on the telecommunications industry;
- The breadth, duration and deliberate nature of the conduct; and
- The fact that Altice engaged in gun jumping not just once, but twice.
It is also specified that the FCA took into account the fact that companies decided to settle and not to contest the practices or their qualification.
This decision is useful for companies as it provides guidance on what conduct to avoid before obtaining merger clearance from antitrust authorities.
In the context of a merger or acquisition negotiation, companies often believe, and may in fact have, legitimate business reasons to exchange competitively sensitive information prior to closing in order to evaluate the merits of the transaction. In addition, merging companies want to ensure that the businesses can be effectively run as a merged entity as soon as they have consummated their transaction. These business realities create strong incentives for companies to begin to coordinate their business operations prior to closing.
Despite these business reasons for coordinating operations before closing a merger, any failure to comply with the antitrust standstill obligation may result in severe penalties as shown in the FCA case. Companies should remain cautious when preparing integration plans, especially in light of this decision which is part of a wider context of increased enforcement of gun-jumping rules.
 Article L. 430-8 II of the French Commercial Code.
 Decision 13-D-22, 20 December 2013, related to the Castel group situation with regard to article L. 430-8 I of the French Commercial Code.