Ernst & Young Judgment – limiting principles on "gun jumping"
In a landmark ruling of 31 May 2018, the European Court of Justice held that the obligation under EU Merger Control rules not to implement a transaction prior to obtaining merger control clearance (the “standstill obligation”) should, in principle, be confined to (i) the actual acquisition of control; or (ii) measures that contribute to the acquisition of control. This is a significant limitation of the scope of the standstill obligation as it has been interpreted by Competition Authorities so far in the EU.
This judgment could have far-reaching implications for integration planning and deal structuring. It gives more leeway for merging parties to agree and implement preparatory measures that do not confer control or directly contribute to the eventual acquisition of control. However, parties should remain cautious, as it remains to be seen how the Competition Authorities will interpret this judgment in practice, and the general rules on anticompetitive practices (for instance, exchange on sensitive information) also apply in transaction settings.