EY wins European Court of Justice action over alleged “gun jumping”
On 31 May, the European Court of Justice (the CJEU) ruled in the case about alleged “gun jumping” in the merger between KPMG Danmark and EY. In its ruling, the CJEU agreed with EY that there had been no pre-implementation – or so-called “gun jumping” – in the merger.
Termination of a cooperation agreement such as the one involved in this case does not qualify as pre-implementation of a merger still awaiting approval by competition authorities.
By assistant attorney Pernille Tinndahn-Nielsen
The Danish Maritime and Commercial High Court, in 2015, referred a number of questions to the CJEU for preliminary ruling, seeking to clarify whether EY and KPMG Danmark had infringed competition law by implementing the merger of the two companies before it had been approved by the Danish competition authorities. Both European law and national law prohibit the implementation of a merger of two companies – if the companies are obliged to notify the authorities of the merger – before it has been approved by the competition authorities. This form of pre-implementation of mergers is also referred to as “gun jumping”.
In the present case, KPMG had terminated the cooperation agreement that it had in place with the international KPMG network before the merger between KPMG and EY had been approved by the Danish Competition Council. The Danish Competition Council found that this violated the prohibition of pre-implementation under competition law. The Council held that the termination was merger-specific and irreversible and could, in itself, potentially affect the Danish market for auditing services.
The CJEU – unlike the Danish Competition Council – found that the termination of the cooperation agreement did not qualify as implementation of the merger because it did not "as such contribute to a change of control of the target enterprise on a lasting basis". The CJEU reached this conclusion despite the fact that the termination was linked to the merger at hand and that it could potentially affect the market.
The case before the CJEU was heard on 15 November 2017. Attorney General Wahl delivered his opinion in January, and with the CJEU’s ruling the case has now been finally solved.
The Danish Maritime and Commercial High Court will now deliver its final judgment on the basis of the CJEU’s ruling.
Jens Munk Plum of Kromann Reumert and Gitte Holtsø of Plesner assisted EY in the case.
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