The French Competition Authority issues the highest merger control "gun jumping" fine ever

On 8 November 2016, the French Competition Authority (FCA) sanctioned the Altice group with an 80 million euro fine, pursuant to Article L. 430-8 of the French Commercial Code, for “gun jumping”, i.e. the completion of the acquisition of SFR and Virgin Mobile by Numericable, before the FCA’s clearance.

The 80 million euro fine marks the highest ever handed down by a competition authority. Prior to it, the highest was the 20 million euro fine handed down by the European Commission and dating back in 2009.

Background

In 2014, the Altice group, which then operated in France through its subsidiary Numericable, notified the FCA of two upcoming mergers:

• the acquisition of the SFR group, notified on 5 June 2014 and cleared subject to commitments, following Phase 2; and
• the acquisition of sole control of the OTL group, which distributes telecoms services under the Virgin Mobile brand, notified on 25 September 2014 and cleared without commitment.

Following the clearance, several competing telecom operators informed the FCA of possible gun jumping in connection with both acquisitions. The FCA therefore conducted dawn raids at Numericable, SFR and OTL premises.

What were the FCA’s findings?

When filed with the FCA, a merger can only become effective after the FCA issues a clearance decision, subject, where necessary, to conditions (divestitures, commitments, etc.).
Notification to the FCA is therefore a “suspensive” procedure which means that until clearance, the parties to the merger must continue to behave as competitors and refrain from acting as a single entity.

In this particular case, the evidence recovered during the dawn raids showed that Altice’s behaviour led it to exert a decisive influence over its targets. Indeed, even though the ownership of assets was not transferred during the notification period, the FCA found that Altice intervened in the operational management of SFR and OTL on several occasions by validating a number of sensitive and strategic decisions.

For example, Altice and SFR negotiated and operationally prepared the launch of a new range of Internet access offers under the SFR brand, using its set-up boxes, TV packages and the Numericable network. This project marked a major turning point in SFR’s high-speed broadband strategy, which until then had concentrated on developing its own infrastructure. This ‘Box offer’ was launched on 18 November 2014, only a few days after the FCA had cleared the merger on 30 October 2014.

In relation to the OTL merger, Altice set up a weekly information reporting mechanism allowing it to keep close track of OTL’s economic performance and provided Altice with access to commercially sensitive information. Moreover, the FCA found that OTL’s Managing Director had begun to carry out his duties within the SFR group before the merger had been cleared and, in particular, was involved in SFR’s new commercial projects, receiving commercially sensitive information.

What are the lessons one can draw from this decision?

When applying the fine, the FCA took into account the scale of the transactions concerned, both in terms of the value of the acquisitions and in terms of the impact on the telecoms sector. It also considered the extent of the deliberate gun jumping behaviours in both mergers, some of which were directly connected to the competition risks precisely identified by the FCA in its clearance decision.

It is important to note that the Altice Group chose to settle the case. The settlement procedure ensures notably the confidentiality of the conditions of the settlement, which also limits the risk of liability towards its competitors.

Last but not least, this decision is a signal to companies that closing a merger deal shall always include merger control checking. Sometimes losing a few weeks in a merger control filing can actually save you some good money.

To find out more, please contact Alexandre Glatz and Anouchka Vie.