Defining Gun Jumping
The boundary line between lawful planning/preparation and unlawful gun jumping is not always clear. In a ruling on May 31,2 the EU's Court of Justice confronted a situation in which a merger agreement between two accounting firms required one of the merging parties to terminate a cooperation agreement with a third accounting firm that was not a party to the merger agreement. The cooperation agreement was terminated before the merging parties notified their merger for antitrust approval. After the termination (but before the merger was approved), several customers switched their business from the merging party to the third accounting firm. The court interpreted the ban on gun jumping under the EU Merger Regulation as allowing the termination of the cooperation agreement, even though the merger had not yet been approved and the termination produced market effects (the switching of customers to another supplier). According to the court, the ban on gun jumping does not prohibit steps in the period before antitrust approval that are “preparatory or ancillary” to closing the transaction. Instead, it prohibits actions in that period that implement the transaction itself, notably by conferring on a merging party influence over the other merging party’s business.
This ruling should provide significant comfort to merging parties for whom the lack of clarity in gun-jumping rules can sometimes present a barrier to effective integration planning and to managing the expectations of customers and suppliers during the preclosing period.
1 European Commission, Case M.7993, April 24, 2018.
2 Case C-633/16, Ernst & Young P/S v. Konkurrencerådet.
