What is Gun Jumping?

Gun Jumping means acting before the appropriate time and refers to situations where a party or parties to a combination (M&A deal) consummate a transaction before CCI approves

What is Gun Jumping?

About Gun Jumping: 

  • It essentially means acting before the appropriate time and refers to situations where a party or parties to a combination (M&A deal) consummate a transaction before CCI approves the transaction, thereby, violating standstill obligations.
  • It is all about competition and merger control.
  • Gun Jumping in competition jurisprudence occurs when parties to Mergers and acquisitions deal consummate the transaction without keeping the competition authorities informed.
  • Most competition regimes, including India, requires pre-merger notification (in India it is the CCI)
  • The concept of gun-jumping has not been expressly defined in the Competition Act, 2002.
  • The law requires parties to a deal satisfying certain monetary thresholds, to first notify the CCI about the impending transaction.
  • Parties are then obligated to conform to the standstill provisions — wait for 210 days from the date of notifying or till CCI approval happens, whichever is earlier.
  • During the standstill period, the parties are required to continue to operate their businesses as independent entities.
  • If the parties fail to notify CCI before the consummation of the deal or violate standstill obligations, this is typically referred to as gun jumping.
  • Penalties:
    • The Competition Commission of India (CCI) has the power to penalise parties for Gun Jumping under Section 43A of the Competition Act 2002.
    • The penalty can be as high as 1 per cent of the total turnover or 1 per cent of the assets, whichever is higher, of the combination.

 


Q1) What is the Competition Commission of India?

The Competition Commission of India is a regulatory body in India responsible for enforcing competition laws to promote and sustain competition in various sectors of the economy. Its aim is to prevent anti-competitive practices, promote fair competition, and protect consumer interests.

Source: BL Explainer. Is India emerging as a hub for Gun Jumping?

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