We wrote last summer about an investigation by the Competition and Consumer Protection Commission ("CCPC") into a suspected case of 'gun-jumping', which is the prohibited practice of implementing a transaction without having first obtained merger control clearance. Launched in February 2018, the CCPC's investigation into whether Armalou Holdings Limited breached merger control rules when it acquired Lillis O'Donnell Motor Company Limited (through its wholly-owned subsidiary, Spirit Ford Limited), without first obtaining merger control clearance, remains ongoing.
Since then, competition enforcers across the globe have continued to take action against gun-jumping. These cases provide useful guidance to merger parties about what actions (eg pre-integration planning) may be acceptable and what may fall foul of the rules.
For example, a recent case in Australia involved the only two suppliers of blood and tissue services (Cryosite and Cell Care). Cryosite had signed an agreement to sell its assets in its blood and tissue banking business to Cell Care. On signing the agreement, Cell Care made an upfront, non-refundable payment of AUS $500,000 to Cryosite and, in return, Cryosite agreed to refer all customer enquiries to Cell Care after the agreement was signed but before the acquisition was completed. The Australian Competition and Consumer Commission (the "ACCC") found that this essentially amounted to a cartel, since it restricted or limited Cryosite's supply of blood and tissue banking services and allocated potential customers from Cryosite to Cell Care. It ordered Cryosite to pay AUS $1.05 million in penalties, which was recently confirmed in the Australian Federal Court.
The lesson?
Parties to a transaction must remain independent and continue to
act as competitors, even though they may have signed a merger or
acquisition agreement, until completion of the deal.
Competing businesses must not prematurely coordinate or integrate
their businesses ahead of the completion of a sale, or clearance
from the competition regulator.
This includes, for example:
- jointly marketing products;
- sharing commercially sensitive information (eg on future pricing or commercial strategy); and
- jointly acquiring goods or services.
Pre-integration planning can be permissible with appropriate safeguards (including, for example, a clean team) but legal advice should first be sought. Should deals not proceed (as in the case of Cryosite and Cell Care), it is essential to ensure that any confidential information shared in a clean room is returned or destroyed.
Back to Ireland and, as regards Armalou Holdings: if the CCPC does identify a breach, it can seek to fine the companies, on conviction on indictment, up to €250,000. A decision remains pending.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.