On September 22, 2021, the General Court dismissed Altice’s appeal against two fines totalling €124.5 million imposed by the Commission in 2018 (the “Decision”) for exercising control over PT Portugal before the acquisition had received merger control clearance, i.e., gun-jumping.
While the General Court upheld most of the Commission’s reasoning in relation to Altice’s unlawful exercise of decisive influence over PT Portugal, it ordered a 10% reduction of the €62.25 million fine relating to the breach of the obligation to notify the transaction to the Commission.
The Commission Decision sanctioning Altice
In December 2014, telecommunications operators Altice and PT Portugal entered into a Share Purchase Agreement (“SPA”) for the former to acquire the latter. In February 2015, Altice notified the transaction to the Commission. On April 20, 2015, the Commission conditionally cleared the transaction. However, following press reports on contact that occurred between the companies’ executives in advance of clearance, the Commission launched an investigation regarding a possible gun-jumping infringement.
In particular, the Commission sought to determine (i) whether Altice had infringed the obligation for concentrations to be notified to the Commission before they are implemented under Article 4(1) EU Merger Regulation (“EUMR”); and (ii) whether Altice had infringed the obligation for concentrations not to be implemented before the Commission declares them compatible with the internal market under Article 7(1) EUMR.
The Commission’s investigation concluded that Altice had exercised decisive influence over PT Portugal’s business before clearance and, in some instances, even before notification. First, the SPA entitled Altice to veto a broad range of PT Portugal’s corporate and commercial decisions and “went beyond the aim of value preservation of the target.”
Second, the actions that Altice took following the signing of the SPA showed that Altice had actually exercised control over PT Portugal before notification. Third, from the signing of the SPA, the parties had exchanged sensitive, recent, and granular financial data without the necessary confidentiality measures.
On April 24, 2018, the Commission fined Altice €62.25 million for implementing the transaction before its notification, and an additional €62.25 million for implementing the transaction before clearance. The Commission regarded Altice’s infringements as “serious” and “intentional or at the very least negligent” given Altice’s significant past experience in merger control, attested awareness of gun-jumping risks, and the serious competition concerns that the transaction raised.
The General Court’s judgment
On July 5, 2018, Altice brought an action before the General Court seeking to annul the Decision. Altice argued that the obligation to notify the transaction under Article 4(1) EUMR and the fine sanctioning the failure to comply were redundant in light of the standstill obligation under Article 7(1) EUMR.
The General Court dismissed the claim, and held that Articles 4(1) and 7(1) EUMR pursue autonomous objectives and, therefore, are not redundant: while the former imposes a positive obligation to act (i.e., obligation to notify a concentration), the latter sets out a negative obligation not to act (i.e., prohibition to implement a concentration before it is cleared). The General Court noted that these provisions are distinct given that an undertaking may comply with the notification obligation while simultaneously infringing the standstill obligation.
Altice also disputed the existence of the infringement, arguing that the Commission had erred in law and in fact by finding that Altice acquired sole control of PT Portugal.
First, Altice contended that the SPA did not give it a right to veto PT Portugal’s strategic decisions. The General Court dismissed Altice’s claim and noted that the SPA afforded Altice the possibility to influence PT Portugal’s decision-making via a range of senior management appointment and dismissal rights. The General Court observed that such powers usually confer on their holder a decisive influence over the target’s commercial policy.
Second, the General Court found that the SPA included “extremely broad” provisions on pricing policies, including standard terms and conditions, that obliged PT Portugal to request Altice’s consent to revise its pricing policies.
Third, the General Court noted that the SPA allowed Altice to enter into, terminate, or modify a broad range of PT Portugal’s contracts subject to a specific monetary threshold of €1, which the General Court deemed “so low that it must be held that [the SPA] indeed [goes] beyond what is necessary to preserve the value of the applicant’s investment.” In addition, PT Portugal confirmed that it had to seek Altice’s “consent to all material contracts,” regardless of whether it was in the ordinary course of business.
The General Court concluded that Altice’s extensive rights, combined with the low monetary threshold permitting Altice’s intervention, went beyond what was necessary to preserve the value of the target’s business. The General Court held that the terms of the SPA gave Altice the possibility of exercising decisive influence over PT Portugal before the notification of the transaction. In fact, the General Court found that exchanges of sensitive information took place before notification, allowing Altice to exercise decisive influence over PT Portugal, and that Altice intervened in PT Portugal’s ordinary course of business on seven instances before clearance.
In response to Altice’s claim that the Commission’s fines infringed the principle of proportionality, the General Court found that Altice had informed the Commission of the transaction before the signing of the SPA and had sent, immediately after the signing, a case team allocation request to the Commission, followed by a draft notification form, including a copy of the SPA and its annexes. The General Court thus took account of the steps Altice had taken towards a notification and reduced the €62.2 million fine relating to the breach of Article 4(1) EUMR by 10%.
Following a spate of gun-jumping decisions and judgments at the EU level, the Altice judgment further confirms that extensive rights for the acquirer in the sale agreement may be construed as conferring control over the target and lead to high fines. A case-by-case analysis of the related clauses and monetary thresholds must therefore be conducted to determine whether such covenants go beyond what is necessary to prevent any material changes to the target’s business and preserve the value of the acquired business.
This judgment also reaffirms the standstill obligation as a cornerstone of EU merger control and strengthens the Commission’s stringent policy vis-à-vis gun-jumping cases. Interestingly, the Altice judgment was issued shortly after pharmaceutical company Illumina closed its acquisition of GRAIL before obtaining the Commission’s approval.
The ruling may also find an echo in the Canon case, in which Canon is seeking annulment of a €28 million fine imposed by the Commission in 2019 for implementing its acquisition of Toshiba Medical Systems Corporation before seeking and obtaining merger control clearance. Although the issue is distinct from Altice, Canon contends that the “warehousing” deal structure did not give it any control over the target. The General Court’s assessment in Altice may thus provide a useful parallel for the assessment of Canon’s conduct.
 Altice/PT Portugal (Case COMP/M.7993), Commission decision of April 24, 2018.
 Altice v European Commission (Case T-425/18) EU:T:2021:607 (“Altice”).
 Altice/PT Portugal (Case COMP/M.7499), Commission decision of April 20, 2015.
 Commission Press Release IP/17/1368, “Commission alleges Altice breached EU rules by early implementation of PT Portugal acquisition,” May 18, 2017.
 See, Cleary Gottlieb’s July-September 2018 EU Competition Quarterly Report for reporting on the Commission’s decision.
 Decision, paras. 483–484 and 488–491.
 Ibid., para. 480–481.
 Ibid., paras. 489–490.
 Ibid., para. 482.
 Ibid., para. 573.
 Ibid., paras. 580 et seq.
 Altice, paras. 56.
 Ibid., para. 63.
 Ibid., paras. 109–114.
 Ibid., para. 115.
 Ibid., paras. 109 and 117.
 Ibid., para. 118.
 Ibid., paras. 117 and 131.
 Ibid., para. 132.
 Ibid., paras. 240 and 366.
 Ibid., paras. 181–199. For instance, PT Portugal requested Altice’s consent before launching a campaign “to speed up customer migration from pre-paid contracts to post-paid contracts” for mobile services. Altice also intervened in negotiations over whether PT Portugal would renew the distribution agreement for the Porto Canal sports channel.
 Ibid., para. 367.
 Ibid., para. 368.
 See, in particular, Marine Harvest/Morpol (Case COMP/M.7184), Commission decision of July 23, 2014; Marine Harvest v Commission (Case C10/18 P) EU:C:2020:149; Ernst & Young (Case C-633/16) EU:C:2018:371 (and our June 25, 2018 Alert Memorandum “EU Merger Control Standstill Obligation – EY Judgment”); and Canon/Toshiba Medical Systems Corporation (Case COMP/M.8179), Commission decision of June 27, 2019.
 See Commission Press Release IP/21/4322, “Commission starts investigation for possible breach of the standstill obligation in Illumina/GRAIL transaction,” August 20, 2021. The Commission recently issued a Statement of Objections in view of adopting interim measures, despite Illumina’s promise that it would hold GRAIL as a separate company in consideration of the Commission’s ongoing review.