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12 July 2018

Australia brings first ever merger 'gun jumping' case

The first ever 'gun jumping' case has been brought by the Australian Competition and Consumer Commission (ACCC).


The first ever ‘gun jumping’ case has been brought by the Australian Competition and Consumer Commission (ACCC), alleging biotech company Cryosite agreed to coordinate with competitor Cell Care Australia prior to their merger agreement being completed. ‘Gun jumping’, where merger or acquisition parties are competitors and coordinate before completion, has also been the subject of fines and investigations in Europe.

Jumping the gun

The ACCC started proceedings in the federal court against Cryosite for alleged cartel conduct. ACCC chairman Rod Sims said, ‘Cryosite effectively jumped the gun by referring its customer enquiries to Cell Care before the deal was completed, by ceasing to supply cord blood and tissue banking services to new customers.’ In June last year Cryosite signed an agreement to sell assets to Cell Care, which made an upfront, non-refundable payment of $500,000. Cryosite chairman Bryan Dulhunty said in a statement the company was notified late yesterday by the ACCC that it has filed civil proceedings against Cryosite in the Federal Court, and the transaction ‘did not ultimately proceed’ and Cryosite ‘is currently considering the ACCC’s proceedings.’ The ACCC said it was seeking declarations, pecuniary penalties, a compliance training program and costs. Mr Sims noted, ‘Gun jumping conduct is a concern for competition regulators around the world, who have taken action for similar conduct by merging parties.’

Europe takes action

In April the European Commission imposed a record fine of €124.5 million on company Altice for implementing its acquisition of the Portuguese telecommunications operator PT Portugal before notification or approval by the Commission. European competition authorities deny they been too heavy handed in their approach to gun jumping. Commissioner Margrethe Vestager, in charge of competition policy, said in April "companies that jump the gun and implement mergers before notification or clearance undermine the effectiveness of our merger control system.’ In May 2017, the Commission fined Facebook €110 million for providing incorrect or misleading information during the Commission's 2014 investigation under the EU Merger Regulation of Facebook's acquisition of WhatsApp. In July 2017, the Commission sent three separate Statements of Objections to Merck and Sigma-Aldrich, General Electric and Canon alleging they breached EU merger rules: one to General Electric, and one to Merck and Sigma-Aldrich for allegedly providing incorrect or misleading information; one to Canon for allegedly implementing a merger before notification and clearance. These investigations are ongoing.

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