In a decision dated 8 November 2016, the French Competition Authority (FCA) has sanctioned jointly Altice Luxembourg and SFR Group and imposed a record fine of 80 million euros for what is known as "gun jumping" practices ie the anticipated implementation of two mergers prior to obtaining merger clearance. While it is a French case, these "gun jumping" issues are the same across all jurisdictions where there is a mandatory merger control regime which requires pre-clearance before closing.
The decision is unique given the extent of implemented steps undertaken and the level of fine imposed. It is the first decision in France that sanctions gun jumping practices, and as such it contains a strong message to companies - in case of infringement, sanctions may be heavy.
In theory, the maximum amount of fine incurred for a gun jumping practice is up to 5% of the total turnover out of taxes achieved in France by the acquirer (if it is a legal entity) during the last financial year, increased if need be, by the turnover achieved during the same period by the target company.
Quite surprisingly, Altice and SFR did not dispute the reality of the practices nor their legal qualification.
What practices were concerned?
Intervention in the operational management: Altice intervened in the operational management of SFR on several occasions, validating a number of strategic decisions such as (but not limited to):
- The principle and modalities of SFR's application for a public tender which have been subject to the agreement of the top management of Altice;
- The renegotiation of a major contract of network sharing between SFR and Bouygues;
- The direct intervention of Altice in the commercial strategy of SFR and in particular its pricing policy. SFR had for example to suspend a promotional offer.
- The tight coordination between SFR and Altice regarding the contemplated acquisition of OTL. The amount of the offer proposed by SFR was communicated to the president of Altice and ultimately the latter substituted to SFR to proceed to the acquisition.
Reinforcement of economic ties: Altice and SFR implemented by anticipation a coordinated strategy between the two groups. They even negotiated and prepared operationally the launch of a new range of SFR offers which radically changed SFR strategy in the field. Several months were needed to adapt the devices, commercial teams, IT systems so as to enable SFR to launch the new offer few days after the merger clearance.
Strategic exchanges of information: the level and extent of information shared was significant and was aimed at preparing the integration of the two groups. The information was confidential, individualized, recent and related to commercial performance of SFR and projection for the coming months. The top management of both groups was involved. A structured mechanism was implemented so as to obtain information on a weekly basis. Such monitoring was considered by the FCA as equivalent to the one undertaken by a controlling shareholder.
Anticipated entry in function of top management: the director general started his functions within SFR Numericable before the merger clearance, being associated to new commercial projects and recipient of commercially sensitive information.
How the FCA determined the fine?
The level of fine is significant and the FCA indicates that it took the following considerations into account:
- The importance of the transaction at stake in terms of value of the acquisition and impact on the telecom sector;
- The extent and accumulation of infringements having led to the anticipated implementation of the acquisition, some of which were directly related to the competitive concerns identified by the FCA in its clearance decision;
- The extent of SFR and Virgin activities directly concerned by the practices;
- The duration of the infringements which have lasted during the whole notification process;
- The fact that similar practices were undertaken by Altice for two distinct transactions filed in 2014 and the deliberate character of such infringements;
- The fact that neither Altice nor SFR disputed the reality of the practices nor their legal qualification.