Record EU gun-jumping fine

Much of 2023’s tally is made up of the European Commission (EC)'s highest ever gun-jumping fine.

The EC fined Illumina EUR432m for completing its acquisition of GRAIL while the EC’s phase 2 investigation was ongoing. Illumina publicly announced it had closed the transaction. The company argued that the EC had no jurisdiction to review the deal under its revised Article 22 referral policy and that the transaction would accelerate patient access to tests for early detection of cancers.

The EC imposed the maximum possible fine (10% of global group turnover) for Illumina’s deliberate infringement of the rules.

This is an unusual case on its facts but shows the EC’s strict approach to procedural enforcement. It also demonstrates the authority’s willingness to hold a target company accountable for its role in any breach: GRAIL was fined a nominal EUR1,000.

An important court victory in a separate case is likely to give the EC further confidence. In November, In November, the European Court of Justice upheld Altice’s fine for failure to notify and jumping the gun in relation to its acquisition of PT Portugal, albeit with a slightly reduced penalty of EUR115.2m.

As well as endorsing the illegality of Altice’s conduct in the period before merger control clearance was obtained, the ruling confirms the importance of correctly framing pre-completion covenants in deal documents. They should not go further than necessary to preserve the value of the target pre-completion and must not give the acquirer veto rights over matters that would give it early control.

No published enforcement action in China

In previous years, China’s State Administration for Market Regulation (SAMR) has been the most prolific enforcer of procedural merger control rules. In 2022 it published over 30 separate fines for gun-jumping. Many expected the ten-fold increase in maximum fines that took effect that year to result in record penalties in 2023.

Instead, SAMR did not announce any procedural fines last year. There are two possible explanations. First, we understand that SAMR has now reached the end of its campaign to enforce against historic non-notified deals in the digital sector, which caused a spike in fining decisions in recent years. Second, SAMR may have continued to issue fines for gun-jumping but without publishing its findings.

Merger control compliance clearly remains on SAMR’s agenda. During 2023 it consulted on guidelines that will clarify the calculation of fines under the new higher fining levels.

Other antitrust authorities continued their active approach to procedural enforcement in 2023. Brazil’s CADE reached five fining decisions. The Competition Commission of India (CCI) totaled seven.

In several of the Indian cases, the CCI rejected arguments that an exemption from the filing obligation applied. This warns parties to deals with an Indian nexus to rigorously assess the application of exemptions under the Indian regime, particularly in situations where the CCI is likely to adopt a very literal interpretation of the rules.

Authorities tough on breach of merger remedies

Policing remedies remained high on the agenda in 2023. We saw a number of heavy fines:

• Spain: the Spanish National Markets and Competition Commission fined Telefónica twice (EUR11m in total) for breaching commitments in relation to its 2015 acquisition of pay-TV operator DTS. The company has been fined up to three times for non-compliance in less than a year.
• Turkey: EssilorLuxottica was fined TRY492m (approx. EUR19m) by the Turkish antitrust authority – the company imposed exclusivity provisions that infringed commitments entered into as part of its purchase of Essilor.
• U.S.: the Federal Trade Commission is suing 7-Eleven for violating a consent order by acquiring a fuel station in 2018 without notifying the agency. 7-Eleven faces a penalty of USD77m.

Stronger penalties in the U.K. and Ireland

Elsewhere, antitrust authorities are obtaining more robust powers -to enforce against procedural merger control infringements.

A new gun-jumping offence was introduced in Ireland, subjecting merging parties to fines of up to EUR250,000. This supplements the existing offence of failing to notify a deal.

In the U.K., the Competition and Markets Authority (CMA) continued its strict enforcement of procedural rules with a GBP2.5m fine on Copart for breaching an initial enforcement (“hold separate”) order. It also fined the same company GBP25,000 for failing to respond to information requests.

The difference between these two penalty amounts is striking. The U.K. regime currently caps the fine for information infringements (as well as breach of remedies) at GBP30,000. But repeated calls by the CMA for tougher fining powers for these types of violation have resulted in draft legislation that will dramatically increase penalties.

Once in force, merging parties will face fines of up to 1% of global group turnover for failing to comply with information requirements, and up to 5% of global group turnover for breaching merger remedies.

We expect both authorities to join other agencies in making full use of their new powers.