Jurisdiction - India
India – CCI Rules On The First Gun Jumping Case.

24 March, 2014



A recent decision by CCI serves as a timely reminder of the importance of notifying a combination and obtaining clearance from the Indian anti-trust regulator before proceeding with a transaction. In December 2013, CCI imposed a penalty of INR 10m on Etihad for implementing certain arrangements with Jet (‘Jet-Etihad’) without having received an approval from CCI under the merger control regime i.e. “gun jumping”.

Based on CCI’s ruling in the Jet-Etihad case, this article intends to set out the [importance of notification], and the meaning and scope of gun jumping and also provide some practical advice on minimising the risk of gun jumping investigations in mergers and acquisitions.

Meaning And Scope Of Gun Jumping

“Jumping the gun” (or “gun jumping”) is a colloquial term used by anti-trust lawyers worldwide, which simply refers to the practice of consummating a transaction before receiving the statutory clearance from the relevant competition regulator, or illegal co-ordination between the merging parties prior to closing.

Broadly speaking, “gun jumping” can be categorised into: (i) procedural gun-jumping and; (ii) substantive gun jumping. Procedural gun jumping occurs when the transacting parties fail to comply with the requirement of mandatory pre-merger notification, and close the transaction prior to the expiry of the waiting period. On the other hand, substantive gun jumping would entail an improper pre-closing integration of the parties to a transaction, for example, sharing of commercially sensitive information, allocating customers, ceasing marketing in competition with each other during the waiting period.

Indian Experience: Jet–Etihad

Under the Indian merger control regime, failure to notify CCI of a proposed combination attracts a penalty that can extend up to 1% of the total turnover, or the assets of the parties involved in the combination, whichever is higher. While CCI has, in three instances1 imposed penalties on parties for delayed filing (i.e. belated notice),2 Jet- Etihad is the first precedent in India where a penalty has been imposed on the acquirer for gun jumping.

Given that CCI has imposed a penalty on Etihad under Section 43A of the Act (Penalty for delayed filing), it is clear that the consequences of “gun jumping” include a monetary penalty (similar to a belated notice), and the risk of putting the legal validity of the transaction in question.

In Jet- Etihad, Etihad, the acquirer, on May 1, 2013, had notified CCI of its proposed acquisition of 24% equity stake in Jet. The transaction was approved by CCI on November 12, 2013. CCI, while approving the transaction, observed that: (i) certain provisions of the commercial cooperation agreement (‘CCA’) had already been implemented; and (ii) sale of certain landing/take off slots of Jet at the London Heathrow Airport (‘LHR Transaction’), had not been notified before consummation. Upon hearing the parties, CCI limited the penalty due to certain mitigating factors, such as: (i) the fact that parties had made full disclosure of all the other transaction agreements entered into between them, from which CCI had observed the non-compliance; (ii) the parties were under the impression that the LHR Transaction constituted an independent transaction; and (iii) while CCA was notified to CCI within the statutory time frame, parts of it were implemented while approval from CCI was pending. Based on these mitigating factors, CCI limited the penalty to INR 10m.

To put it simply, the takeaway from this ruling is that the parties cannot implement a part of the transaction before the expiry of the designated waiting period and the closure of the transaction. In the instant case, the rationale could have been to maintain independent businesses, in case the transaction was not approved by CCI, so that competition in the industry does not suffer.

International Experience

Given that this is technically the first instance of gun jumping in India, experience needs to be drawn from developed jurisdictions such as the EU and the United States (‘US’)3.

In the EU , an instance of gun jumping that occurs most rampantly is where an acquiring company starts exercising control over the target prior to receiving clearance from the European Commission (‘EC’) under the European Merger Control Regulation (‘ECMR’).4 In 2009, EC imposed a penalty of EUR 20 million on Electrabel5 for having committed gun jumping of this nature. The precedent is noteworthy not only for the quantum of penalty imposed, but also for the fact that Electrabel had acquired a minority stake in the target company. EC, nonetheless, concluded that Electrabel had acquired de facto control over the target more than four years before the notification.

Apart from imposition of the monetary fines in EU, parties have also been subjected to dawn raids (unannounced inspection) under the provisions of ECMR for alleged gun jumping offences.

The US on the other hand has had significant experience in dealing with the issue. In recent years, the United States Department of Justice (‘US DOJ’) and Federal Trade Commission (‘FTC’) have initiated a number of gun jumping actions resulting in substantial penalties. The offence of gun-jumping under the US competition regime usually arises when the parties, have, during the waiting period: (i) exchanged commercially sensitive information (such as pricing, strategic plans, marketing plans, etc.); (ii) taken possession or control of any assets, integrated operations; or (iii) held out employees of one party as working for the other, etc.

Gun jumping in the US can attract civil penalties as high as US$ 16,000 per day of violation under the Hart-Scott-Rodino Anti Trust Improvements Act, 1976 (‘HSR Act’). However in reality, antitrust authorities have displayed a preference to settle gun jumping cases. In Gemstar-TV Guide,6 the US DOJ held that, by agreeing to phase out competing marketing operations, allocation of customers and agreeing on prices upon entering into the merger agreement, the parties had, in fact, “jumped the gun”. Gemstar-TV Guide, Inc. agreed to pay US$ 5.7 million (the maximum for the duration of the violation), to settle the case. In Titan International, the FTC was of the view that acquiring possession and use of plant closed by a union strike constituted taking control of the plant. In this case, Titan Wheel International, Inc., agreed to pay US$ 130,000 (the maximum for the duration of the violation) to settle7.

Experiences from the EU and the US demonstrate that antitrust authorities are likely to investigate and prosecute any conduct of the transacting parties implying gun jumping, even if the transaction is ultimately permitted to close. Antitrust agencies typically require the parties to continue operating their business as independent competitors prior to closing. This follows from the general prohibition on the co-ordination of behaviour between competitors, and exchange of sensitive information which could facilitate such co-ordination. Since there is always a risk that the transaction may not ultimately be consummated, it best for the parties to remain as competitors until closing.


As demonstrated by the Jet- Etihad case, we expect that the jurisprudence on gun jumping in India may evolve with practice, and that the standards are likely to be extremely fact specific. Despite the merger review process being relatively nascent in India, it is imperative for the industry to be aware of the merger notification requirements under the Act. To conclude, the international experience will serve as a ground for CCI’s experience in setting parameters of what will constitute substantive gun jumping. For this reason, the parties must remain separate and independent economically until the consummation of a transaction.

Key Takeaways:


  • Parties should ensure that that at the outset of any transaction, a detailed analysis of potential notification obligation is undertaken.
  • Apart from this, parties and counsels should exercise vigilance in relation to their conduct during the waiting period.
  • A strict balance needs to be made between lawful coordination with the parties and unlawful gun jumping.
  • It is advisable to put into place a mechanism to monitor the exchange of information at the very outset (i.e. entering into a confidentiality agreement, etc.).
  • It is always helpful to establish a protocol by which information requests are received and exchanged and reviewed by anti-trust counsel and then forwarded.
  • Parties are to avoid any act or conduct which is perceived as the integration of operation, participation in the day to day operation, of the other party etc.


End Notes:


1 INR 0.5m on the parties for delayed filing (Dewan Housing and First Blue Home Finance Limited) [C-2012/11/92]; INR 10m for delayed filing on the acquirer (Titan International) [C-13/02/109]local nexus and the transaction having been abandoned by the parties (Temasek) [C-2013/06/124].
2 The penalty for belated is up to 1% of the total turnover or assets (whichever is higher) of such combination

3 Other BRICS countries have similar provisions for gun jumping. For example, the Ministry of Commerce in China can impose a maximum fine of ¥ 500,000, while the Administrative Council for Economic Defense (CADE) can impose fines ranging form BRL 60,000 to BRL 60m. The Competition Commission of South Africa can impose penalties of up to 10% of turnover, as well as potential injunctions for gun jumping.
4 Article 14 (2) of the EC Regulation no. 139/2004 on the Control of Concentrations Between Undertakings
5 http://europa.eu/rapid/press-release_IP-09-895_en.htm
6 http://www.justice.gov/atr/cases/f200800/200848.htm#N_6_





For further information, please contact:


Zia Mody, AZB & Partners
[email protected]


Abhijit Joshi, AZB & Partners 
[email protected]

Shuva Mandal, AZB & Partners 

[email protected]


Samir Gandhi, AZB & Partners
[email protected]

Percy Billimoria, AZB & Partners 

[email protected]


Aditya Bhat, AZB & Partners 
[email protected]

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