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 consummate the transaction without keeping the competition authorities informed.
• Most competition regimes, including India, require pre-merger notification (in India, it is the CCI).
• The concept of gun-jumping has not been expressly defined in the Competition Act of 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.