First Criminal Conviction for Gun-Jumping in Ireland
9 April 2019
On 8 April 2019, Spirit Ford owner Armalou Holdings Limited pleaded guilty in a summary trial ( a trial without a jury) before Dublin Metropolitan District Court to acquiring rival Lillis-O’Donnell Motor Company Limited in 2015 before receiving required merger control approval from the Competition and Consumer Protection Commission (“CCPC”).
Armalou Holdings was required to pay a fine of €2,000 to charity and the Probation Act 1907 was imposed for one year. The court found that there had been an inadvertent, rather than a wilful breach of the law.
Under Irish competition law it is a criminal offence to implement a merger or acquisition that is notifiable to the CCPC without first securing clearance from the CCPC (commonly known as “Gun-Jumping”). Significant penalties can be imposed (i.e. fines on conviction on indictment (a jury trial) of up to €250,000 (with a maximum daily default fine of €25,000)). Furthermore, such a transaction is void.
Therefore, parties to a prospective merger or acquisition should ensure that merger control analysis is conducted before entering into the proposed transaction. If a merger or acquisition is notifiable to the CCPC clearance from the CCPC should be obtained before the proposed transaction is completed.
Furthermore, preparatory steps taken to bring the proposed transaction into effect should not themselves constitute Gun-Jumping. Until clearance from the CCPC is obtained, parties to a notifiable transaction should remain independent and should not proceed as though the deal is already complete. The following conduct should be avoided by the parties prior to CCPC clearance:
- Any coordination that could be characterised as an agreement on prices or terms of trade, or allocation of customers or markets
- Discussions about prices or specific customers or terms of trade offered to specific customers
- Joint advertising, or any other activity that may lead customers or suppliers to believe the parties are joint entities or unified
- Coordination of production or distribution
- Attending each other’s internal board or other meetings, unless meeting for integration planning or due diligence
- In an acquisition, the prospective buyer must not require the prospective seller to seek its approval before conducting the target’s normal business or limit the way in which the target operates in the normal course
It is, of course, permissible for the transacting parties to acquire a great deal of information about each other pre-clearance. A prospective buyer will have to undertake due diligence, which will involve a detailed review of the target’s business. However, certain categories of information may be too competitively sensitive to be exchanged pre-clearance.
As a general rule of thumb, if a party to the proposed transaction is concerned about a competitor having access to the sensitive information, it should exercise caution in providing it to the other party to the proposed transaction pre-clearance.
Please contact Eoghan Ó hArgáin, Head of EU, Competition and Regulated Markets if you have any queries.