When a company is in receivership, one of the solutions to avoid bankruptcy may be a merger and acquisition. It consists of the transmission of assets from one company to another: the elements of the assets and liabilities of the absorbed company are recovered by the absorbing company, which implies the dissolution of the absorbed company but without liquidation, as well as ‘a transmission of social rights. For the acquiring company, merger and acquisition can, for example, be a means of diversifying its activity or of increasing its presence in a market.
The merger and acquisition operation
However, we must not forget that merger absorption is a complex operation which must comply with numerous procedures. First of all, it is necessary to carry out numerous studies prior to the merger-acquisition operation in order to be able to identify the strengths and weaknesses of the operation. Then it is necessary to prepare the integration with the setting of objectives and tasks to achieve them. But the merger-acquisition operation can also have consequences on the market and on the players surrounding the two companies affected by the merger, which is why the European Union has regulated this operation with the adoption of the regulation n ° 139/2004 of 20 January 2004 on the control of mergers between companies . In particular, in Article 4, it establishes a prior notification of the concentration to the European Commission before its completion and after the conclusion of the concentration agreement when the operation concerns several Member States and the turnover of the companies concerned are of considerable importance. This is supplemented by Article 7 which requires that a notified merger operation not be carried out until the Commission has given its consent to the merger and affirmed that it was compatible with the European common market. The companies which do not respect this obligation of suspension of the operation so that it is controlled are guilty of “ gun jumping “. A fault which is heavily sanctioned by the European Commission whether or not the transaction was notified before its completion. The competition authorities of the Member States also play a considerable role in monitoring compliance with Union law by economic players. Under certain conditions defined by national law, a merger may be subject to the agreement of a competition authority. But in general, these play a controlling role.
The violation of European Union rules concerning the concentration of companies
Various competition authorities have taken up the question of “ gun jumping ” and beyond the cases of outright absence of notification, it is on the conditions for the completion of the phase of due diligence and organization of the transitional phase between the “ signing ” and the “ closing ” expressed by these institutions. This was the case with the French Competition Authority which, on March 8, 2017, adopted a decision sanctioning Altice concerning the takeover of SFR. It sanctioned the company for failing to respect the commitments made in 2014 relating to the co-deployment agreement for a fiber optic network concluded with Bouygues Telecom. In 2014, the takeover of SFR by Altice was authorized by the French Competition Authority on condition that the company respects a number of commitments to avoid harm to competition. SFR had made a commitment to Bouygues Télécom to provide final connection services to buildings so that Bouygues Télécom could benefit from the deployments that it co-financed by marketing its fiber offers to the homes concerned, the authority of the Competition made its agreement to the merger between them, Altice and SFR Group, subject to compliance with this commitment because Bouygues Télécom risked being affected by the merger given its contractual relations with SFR. Finally in 2017, the French Competition Authority concluded that the Altice and SFR group had not respected their commitments and imposed a sanction in the amount of 40 million euros.
In addition, this is not the last time that the company Altice has been sanctioned for violating European Union rules on the concentration of companies. On April 24, 2018, the European Commission fined Altice 125 million euros for having acquired the Portuguese telecommunications operator PT Portugal before any notification or authorization from the Commission. The Commission says it: the European rules on the concentration of companies aim to preserve fair competition, by freeing the company Altice from it for the proper functioning of the internal market. The suspension obligation to which companies are subject makes it possible to avoid potential irreparable negative consequences of operations on the market.
We can see that the European Commission is very vigilant as regards compliance with the notification obligation on the part of companies wishing to proceed with a merger. Indeed on July 23, 2014 the Commission has sanctioned the farmers and processors of Marine Harvest salmon with the payment of 2 fines of 10 million euros for not having respected the rules set by European law on merger control. The latter took a 48.5% stake in a competing company and announced that for the acquisition of the remaining 51.5% it would launch a compulsory public takeover bid, the Commission considered that the exclusive control of the competing company had been created as soon as Marine Harvest had acquired the 48.5% of the capital. This latest acquisition was made without prior notification to the Commission and prior to its authorization. Consequently, Marine Harvest would have violated European Union law.
After having referred the matter to the General Court of the European Union which confirmed the fine imposed by the Commission, Marine Harvest introduced a appeal to the Court of Justice of the European Union </ a >. Different issues arose.
The first plea put forward by the company is whether the fact that Marine Harvest has acquired 48.5% of the shares in itself constitutes a concentration or, must be considered as constituting a single concentration with the second part. of the transaction within the meaning of article 7 paragraph 2 of regulation n ° 139/2004? The European judges consider that Article 7 (2) only applies if the transaction is “ necessary to achieve a change of control of a company affected by the concentration in question “. In the present case, it asserts that the first transaction made it possible to acquire control of the company and that the second transaction was not necessary for the change of control to take place. Consequently, the Court of the European Union rightly rejected the applicant’s argument that the two transactions constitute a single concentration: the acquisition of the 48.5% of the shares is in itself a concentration .
The principle ne bis in idem
The second issue raised by the applicant is the following: in the event that the first part of the operation does indeed constitute a concentration, was it possible to penalize it with two separate fines? European judges are based on the principle of ne bis in idem which means that no one can be brought before a criminal court for identical facts. The Court considered that this principle must be respected in the procedures which lead to the pronouncement of fines which fall under competition law, that is to say that a company cannot be convicted or prosecuted a second time because of ‘anti-competitive behavior if it has already been convicted of such behavior. It follows that this principle of ne bis in idem does not apply in the present case because the decision was given by the same authority in one and the same decision.
Finally, the Court of Justice of the European Union confirms the court’s decision according to which the commission can impose two separate fines under Articles 4 (1) and 7 (1) of Regulation No 139/2004. The identical amount of the 2 fines is explained by the fact that each of the infringements is considered to be of equal importance. Indeed, the Commission does not distinguish the situation in which an undertakinge carried out a concentration without notifying the Commission of the one in which a notification was made but without respecting the obligation to suspend.
However, although the European regulation on the control of concentrations between companies provides very clearly that the merger cannot be carried out during the period of suspension, it remains imprecise as to the acts that can be exercised during this period. The question therefore arises: what acts constitute a violation of the obligation to suspend the operation during the transitional phase of control by the Competent Authority? The CJEU has finally expressed itself on this issue in a judgment of May 31, 2018 the company KPMG Denmark were bound by a cooperation contract with the company KPMG international, network to which she did not belong directly. The cooperation contract allowed KPMG Denmark to use the KPMG brand exclusively in Denmark. In November 2013 KPMG Denmark concluded a merger project with the company Ernst & amp; Young, then one application of this agreement she terminated the cooperation contract with KPMG international.
KPMG international has decided to remain established in Danish territory and to create a new auditing company, some clients of what was initially KPMG Denmark chose to use the service of KPMG international while others turned to other cabinets. In accordance with European merger regulations, the proposed merger between KPMG Denmark and Ernst & amp; Young has been reviewed by the Danish competition authority. The latter decided to question the CJEU to find out whether the termination of the cooperation contract falls within the scope of the prohibition on carrying out a concentration before the notification or the authorization of the operation, it questioned the European judges under the following terms: “ According to what criteria should it be assessed whether the acts or measures taken by a company fall within the prohibition laid down in Article 7 (1) of Regulation No 139/2004 (the prohibition of [implementation before authorization]) [?] ”, It is therefore a general question, the answer of which would allow all the European competition authorities to know on which criteria are based on whether a company’s actions fall under Article 7 of the Merger Regulation. It then questions the judges to ask them for a clarification on the following point: “ and a measure of achievement, within the meaning of this provision, does it suppose that this measure, in whole or in part, in fact or in right, constitutes an element of the takeover or the merger of the activities which continue to be carried out by the participating companies and which – subject to the thresholds being reached – triggers the notification obligation? ».
“A transaction which, in whole or in part, in fact or in law, contributes to the change of control of the target company “
The European judges recall that the article 7 in question does not make it possible to assess the scope of the suspension obligation incumbent on companies, therefore the criteria must be defined according to the objective pursued by the regulation. Finally, the European judges consider that “ Article 7, paragraph 1, thereof must be interpreted as prohibiting the implementation by the parties to the concentration of any operation contributing to the lasting change of control over one of the companies affected by this concentration . “. The CJEU finally considers that the termination of the agreement between KPMG international and KPMG Denmark did not allow the company Ernst & amp; Young to exercise influence over KPMG Denmark as KPMG Denmark remained independent both before and after termination.
The Court of Justice of the European Union therefore responds in the negative by considering that the prohibition on carrying out a concentration prematurely only applies if the disputed transactions constitute a concentration within the meaning of the European regulation. The judges defining the concentration as “ an operation which, in whole or in part, in fact or in law, contributes to the change of control of the target company “, this is not the case of ” an operation which has no direct link with the concentration even if it is preparatory to it and the implementation of this oThe transaction does not affect the effectiveness of merger control.
In addition, the European judges specified that the fact that the cooperation agreement produces effects on the Danish market does not matter, that is to say that the fact that the clientele 2 KPMG Denmark has turned to other firms is not not sufficient to characterize the change in control.
Consequently the termination of the contract of affiliation to the KPMG network cannot be considered as an early implementation of the merger because it is not directly linked to the change of affiliation even in the event that it would constitute a precondition. to fusion. By this decision, it is the CJEU followed the conclusions of its Advocate General that he invited not to excessively extend the scope of the obligation to suspend concentration operations before it is authorized by the commission. this implies that the measures which precede the merger do not fall under the obligation of suspension.
Eternoscorp supports you in all your merger operations, in compliance with European and national procedural rules.