Short Reads

European Court of Justice rules EY did not violate stand-still obligation in Danish merger

European Court of Justice rules EY did not violate stand-still obliga

European Court of Justice rules EY did not violate stand-still obligation in Danish merger

01.06.2018 NL law

On 31 May 2018, the European Court of Justice ruled that Ernst & Young (EY) did not illegally implement the acquisition of KPMG Denmark (KPMG DK) before obtaining antitrust clearance.  Following the announcement of the transaction, KPMG DK terminated a cooperation agreement. According to the Court, that act cannot be regarded as a violation of the stand-still obligation since it did not contribute to the change of control of the target undertaking.

This case falls within a broader trend of procedural merger control enforcement by the European Commission and national competition authorities. Indeed, competition authorities have been cracking down on merger control infringements, levying hefty fines for the submission of inaccurate information and for 'gun-jumping' [see our May 2018 Newsletter]. Gun-jumping, a broadly used term, refers to three different types of conduct: violations of the duty to notify, illicit information sharing in the context of a contemplated concentration and the violation of the standstill obligation. However, the criteria to assess what constitutes the various forms of gun-jumping are not entirely clear and vary per jurisdiction. 

In this case, at the time of the announcement of the transaction, but before receiving antitrust clearance, KPMG DK gave notice to terminate its membership agreement with KPMG International. The Danish competition authority (DCCA) found that the transaction was implemented prematurely as a result of the termination of KPMG DK's membership. According to the DCCA the notice violated the stand-still obligation as it was merger-specific, irreversible and likely to have market effects. EY appealed the case before the Danish Maritime and Commercial Court, which in turn referred the case to the Court of Justice, requesting a clarification of the scope of the standstill obligation in article 7 (1) of the EU Merger Regulation (EUMR).

Advocate General Wahl noted in his Opinion that none of DCCA's criteria were relevant for determining the scope of the standstill obligation. According to Wahl the concept of  'concentration' is crucial to understanding the standstill obligation, thereby highlighting the importance to show a change of control. Wahl opined that the standstill obligation does not affect measures that precede and are severable from the measures actually leading to controlling the target undertaking. 
In its ruling the Court of Justice concurred with Wahl that to define the scope of the standstill obligation, account must be taken of the definition of concentration.  According to the Court, article 7(1) EUMR must be interpreted as meaning that a concentration is implemented only by a transaction which, in whole or in part, in fact or in law, contributes to the change in control of the target undertaking.

Specifically the Court indicated that where transactions, despite having been carried out in the context of a concentration, "are not necessary to achieve a change of control" of an undertaking, they do not fall within the scope of Article 7 EUMR. Those transactions, "although they may be ancillary or preparatory to the concentration, do not present a direct functional link with its implementation, so that their implementation is not, in principle, likely to undermine the efficiency of the control of concentrations".

This article was published in the Competition Law Newsletter of June 2018. Other articles in this newsletter:

European Commission must reassess Lufthansa's request to waive merger commitments
Dutch Appeal Court drastically reduces cartel fine Dutch construction company
District Court of Amsterdam declines jurisdiction in competition law damages case
Belgian Supreme Court confirms illegality of dawn raids due to the lack of a warrant 

Team

Related news

04.01.2019 NL law
Partial fine reduction for Deutsche Telekom and Slovak Telekom for abuse of dominance

Short Reads - The General Court recently clarified that to establish a margin squeeze in the case of positive margins, the Commission needs to prove the exclusionary effects of the dominant company's pricing practices. It also indicated that in cases of refusal to grant access, it is not always necessary to establish the indispensability of the access.

Read more

04.01.2019 NL law
Walking the tightrope between data protection and EU investigations

Short Reads - Two recent publications confirm that it is possible for companies to cooperate with a European Commission investigation and still comply with the data protection rules. It is also possible for the Commission to deviate from certain data protection obligations in the interest of a competition law investigation. The tightrope between data protection and Commission investigations may not be as rigid as initially feared.

Read more

04.01.2019 NL law
General Court dismisses Canal+ appeal against pay-TV commitment decision

Short Reads - The General Court recently dismissed the appeal brought by Canal+ against the decision of the European Commission making the commitments of Paramount legally binding. In 2015, the Commission sent a Statement of Objections alleging that certain geo-blocking clauses in licensing agreements between film studios and pay-TV broadcasters had the object of restricting cross-border competition.

Read more

04.01.2019 NL law
Guess what, online branding restrictions are on the Commission's radar

Short Reads - Companies are probably aware of the Commission's eagerness to clamp down on online resale price maintenance and geo-blocking restrictions. The recent fine for vertical restraints by clothing company Guess marks a new dot on the Commission's radar. Restrictions on retailers using a supplier's brand names for online search advertising purposes are just as much a no-go.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring