The Danish Competition Council accepts claim in the EY pre-implementation case

9.13.2018

In the pending "gun jumping" case before the Danish Maritime and Commercial High Court, the Danish Competition Council has now accepted EY's claim that the prohibition against pre-implementation, the so-called "gun jumping" prohibition, was not violated by the merger between EY and KPMG Denmark. The Council's acceptance is a consequence of the preliminary ruling issued by the Court of Justice of the European Union ("CJEU") on 31 May 2018, which clarified the criteria of the "gun jumping" prohibition.
By partner Jens Munk Plum and assistant attorney Emil Petri

The "gun jumping" case

The case concerns the question whether EY and KPMG Denmark infringed competition law when KPMG Denmark terminated their cooperation agreement with the international KPMG network before the merger between KPMG Denmark and EY had been approved by the Danish competition authorities.

The Danish Competition Council originally found that KPMG's termination of the agreement violated the "gun jumping" prohibition, their reason being that the termination was merger-specific and irreversible and could, in itself, potentially affect the Danish market for auditing services.

Preliminary ruling of the CJEU 

EY subsequently brought the Competition Council's decision before the Maritime and Commercial High Court, which referred the case to the CJEU for a preliminary ruling. The Maritime and Commercial Court asked the CJEU to answer the question how to interpret the merger rules in the relevant situation, including the "gun jumping" prohibition.

The CJEU ruled that only transactions contributing to a change of control of the target enterprise are subject to the prohibition against implementation of a merger before it has been approved. Since KPMG Denmark's termination of the cooperation agreement did not contribute to a permanent change of control of the target enterprise, the termination did not, according to the CJEU, constitute an unlawful pre-implementation of the transaction. It was therefore of no importance whether the termination could potentially affect the market.  Accordingly, the CJEU agreed with EY that the "gun jumping" prohibition had not been violated.

Read our previous newsletter about the decision: EY wins European Court of Justice action over alleged “gun jumping” 

The Competition Council's decision is expected to be repealed

In the light of the CJEU's ruling, the Competition Council has decided to accept EY's claim in the pending case before the Maritime and Commercial High Court. The Council's decision that EY and KPMG Denmark violated the "gun jumping" prohibition is therefore expected to be set aside.

Furthermore, the Council has announced that in future "gun jumping" cases the Council will observe the criteria set up by the CJEU.

Jens Munk Plum of Kromann Reumert and Gitte Holtsø of Plesner have been advising EY in the case.

Read the Danish Competition and Consumer Authority's press release (in Danish).