Companies involved in multi-step acquisitions should beware of potential gun-jumping risks. The Dutch Authority for Consumers and Markets (ACM) has fined a trade association for failing to notify the acquisition of four pharmacies involving a consecutive partial resale. Unlike the European Commission’s gun-jumping fine for partial implementation of a concentration through a ‘warehousing’ two-step acquisition (see our July 2019 newsletter; appeal pending), the ACM’s fine relates to faulty turnover calculations due to an unmaterialized two-step transaction.
The ACM’s fine is a clear reminder that competition authorities are actively policing all types of potential gun-jumping breaches. Companies are well advised to keep a watchful eye on their gun-jumping obligations.
Similar to the European Commission’s gun-jumping rules, the ACM requires companies (i) to notify an intended concentration to the ACM before its implementation if the turnover thresholds are met (the ‘notification obligation’) and (ii) to await the ACM's clearance of the concentration before implementing it (the ‘standstill obligation’).
In 2019, the VNA, a Dutch trade association for pharmacies, informed the ACM of its intention to acquire four pharmacies and subsequently sell part of one pharmacy’s activities to a third party within 12 months after the acquisition. According to the VNA, the turnover generated by those activities could be excluded from the turnover threshold calculations, since the consecutive resale led the VNA to acquire only temporary control. On the basis of those turnover calculations, the acquisition fell below the turnover thresholds and therefore did not have to be notified, in the VNA’s opinion.
However, financial difficulties at the intended buyer caused the resale to fall through, thereby triggering the ACM’s notification obligations after all. The VNA notified the (already implemented) acquisition to the ACM in 2021.
The ACM believed the VNA had breached the gun-jumping rules by implementing the acquisition before the notification. Since the intended resale had been based on a letter of intent, rather than a legally binding document, the ‘resale activities’ should have been included in the initial turnover calculations. The ACM referred to the European Commission’s Jurisdictional Notice to explain that the turnover of the second step in this type of multi-step acquisition may be excluded from the turnover threshold calculations only if:
- the subsequent resale is agreed between the various buyers in a legally binding manner; and
- the resale takes place within a short period after the first acquisition (no longer than one year).
The VNA’s failure to notify the acquisition in time resulted in a EUR 350,000 fine. The fine would have been higher, but the ACM granted a 35% fine reduction because (i) the VNA cooperated with the investigation in accordance with the ACM’s guidelines for simplified resolution of cases involving a fine; and (ii) the VNA had contacted the ACM in 2019 about the intended acquisition and notified it in 2021 as soon as it realised that the turnover thresholds were being exceeded. An additional fine reduction was granted due to the limited scope of the transaction and the turnover of the four pharmacies, which was just above the ACM’s notification thresholds.
Companies should be aware that multi-step acquisitions might prove tricky from a gun-jumping perspective. Gun jumping appears to be an ongoing hot topic for competition authorities (see our newsletters of November 2017, July 2019, March 2020, October 2021, December 2021 and January 2022). It may therefore be worthwhile to double-check for potential gun-jumping breaches when involved in mergers or acquisitions.
This article was published in the Competition Newsletter of April 2022. Other articles in this newsletter:
- Game on for gatekeepers: Digital Markets Act finalised
- ECJ in Bpost and Nordzucker cleaner limits for non bis in idem
- The ECN+ Directive implemented in Belgium and introduction of merger filing fees