ACCC pulls trigger on first ‘gun-jumping’ cartel conduct case
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Recently the Australian Competition and Consumer Commission (ACCC) brought its first ‘gun-jumping’ proceeding against Cryosite Limited (Cryosite) for alleged cartel conduct relating to Cryosite’s entry into an asset sale agreement with Cell Care Australia Pty Ltd (Cell Care).
This proceeding provides a timely reminder to merging entities to remain independent and not to combine or coordinate their conduct before the actual completion of the merger transaction, as the engagement in premature conduct may amount to “gun jumping”.
In this case, Cryosite signed an agreement to sell its assets in its cord blood and tissue banking business to Cell Care. On signing the agreement, Cell Care made an upfront, non-refundable payment of $500,000 to Cryosite. The asset sale agreement required Cryosite to refer all customer enquiries to Cell Care after the agreement was signed but before the acquisition was formally completed. Cell Care was further restrained from dealing with any Cryosite customer who had cord blood and tissue stored with Cryosite, and the companies agreed that Cell Care would not market to Cryosite’s existing customers.
The ACCC has alleged Cryosite and Cell Care have ‘jumped the gun’, and the competitive restraints and ancillary agreement reached amount to cartel conduct because it restricted Cryosite’s supply of cord blood and tissue banking services and allocated potential customers from Cryosite to Cell Care.
The notion of gun jumping has been quite prominent in other jurisdictions around the world; however Australian’s first gun jumping case emphasises the importance of managing the risks in mergers or acquisitions.
At Macpherson Kelley, we are well equipped to advise and assist in developing appropriate practices to ensure compliance throughout the entire process of a merger or acquisition. If you have any questions relating to mergers, ‘gun-jumping’ or potential cartel conduct, please contact us.
This article was written by Jason Kaye, Lawyer – Commercial.
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ACCC pulls trigger on first ‘gun-jumping’ cartel conduct case
Recently the Australian Competition and Consumer Commission (ACCC) brought its first ‘gun-jumping’ proceeding against Cryosite Limited (Cryosite) for alleged cartel conduct relating to Cryosite’s entry into an asset sale agreement with Cell Care Australia Pty Ltd (Cell Care).
This proceeding provides a timely reminder to merging entities to remain independent and not to combine or coordinate their conduct before the actual completion of the merger transaction, as the engagement in premature conduct may amount to “gun jumping”.
In this case, Cryosite signed an agreement to sell its assets in its cord blood and tissue banking business to Cell Care. On signing the agreement, Cell Care made an upfront, non-refundable payment of $500,000 to Cryosite. The asset sale agreement required Cryosite to refer all customer enquiries to Cell Care after the agreement was signed but before the acquisition was formally completed. Cell Care was further restrained from dealing with any Cryosite customer who had cord blood and tissue stored with Cryosite, and the companies agreed that Cell Care would not market to Cryosite’s existing customers.
The ACCC has alleged Cryosite and Cell Care have ‘jumped the gun’, and the competitive restraints and ancillary agreement reached amount to cartel conduct because it restricted Cryosite’s supply of cord blood and tissue banking services and allocated potential customers from Cryosite to Cell Care.
The notion of gun jumping has been quite prominent in other jurisdictions around the world; however Australian’s first gun jumping case emphasises the importance of managing the risks in mergers or acquisitions.
At Macpherson Kelley, we are well equipped to advise and assist in developing appropriate practices to ensure compliance throughout the entire process of a merger or acquisition. If you have any questions relating to mergers, ‘gun-jumping’ or potential cartel conduct, please contact us.
This article was written by Jason Kaye, Lawyer – Commercial.