Gun jumping: the GC confirms the fine to Canon for early implementation of a concentration

European Union
Certain preparatory acts can give rise to an early change of control
Gun jumping: the GC confirms the fine to Canon for early implementation of a concentration
June 14, 2022

On May 18, 2022, the General Court of the European Union (“GC”) dismissed the appeal filed by Canon Inc. (“Canon”) in Case T-609/19 (Canon v Commission). The GC thus upheld the €28 million fine imposed by the European Commission (“EC”) on Canon for implementing the acquisition of Toshiba Medical Systems Corporation (“TMSC”), a subsidiary of Toshiba Corporation (“Toshiba”), before receiving the relevant authorization (known as “gun jumping”).

As discussed in this post, the GC has already upheld various fines for implementing concentrations before obtaining the relevant authorization. However, this judgment is particularly important, because it is the first time the EC has fined a company for breaching the notification obligations regarding a concentration under a warehousing structure.


On March 17, 2016, Canon and Toshiba publicly announced the acquisition of TMSC by Canon. At the time, Toshiba had significant financial difficulties.

Prior to notifying the concentration, the parties had agreed on a two-step transaction structure, comprised of the interim transaction and the ultimate transaction.

As a first step, Toshiba transferred 95% of TMSC’s shares to MS Holding Corporation, a special purpose vehicle created specifically for the transaction. At the same time, Canon acquired 5% of TMSC’s shares and a call option on the shares that had been transferred to MS Holding Corporation. The call option could not be exercised until the transaction had been authorized. As explained in the judgment, this structure allowed Canon not to acquire formal control of TMSC until it had obtained the necessary clearances from competition authorities, and Toshiba could stop considering TMSC as its subsidiary for accounting purposes.

The second step was implemented in late 2016, after the competition authorities authorized the transaction. Then, Canon exercised the call option to acquire TMSC’s shares.

However, after the EC received anonymous information, and following the corresponding proceedings, on June 27, 2019, the EC decided to impose a €28 million fine on Canon for not previously notifying the transaction and for implementing the concentration before receiving authorization. Canon challenged this decision before the GC.

GC’s judgment

The key question in this case was to determine whether the interim transaction gave rise to the notification obligation and the standstill obligation under the EU merger control regulation. The GC examines this matter based on various concepts discussed below.

Implementation of a concentration

Canon alleged that the interim transaction did not constitute an acquisition of control, arguing that these previous transactions were merely ancillary or preparatory to the implementation of the concentration.

In this regard, the GC stated that the case law by the EU Court of Justice in the cases of Ernst & Young differentiates between the concepts “concentration” and “implementation of a concentration.” On the one hand, concentration means any transaction that leads to a change of control on a lasting basis. On the other, the implementation of a concentration takes place when the parties carry out transactions contributing to a lasting change in the control of the target company. Therefore, to determine possible infringements of article 7(1) of Regulation 139/2004, it must be examined if the preparatory acts contribute to the change of control in the target company, whether in whole or in part, in fact or in law.

So, although in this case the interim transaction did not amount to a final acquisition, the GC confirms that it constituted the early implementation of the concentration because it ultimately enabled the change of control. The GC also underlines that dividing the implementation into partial consecutive transactions cannot allow circumventing the standstill obligation.

Decisive influence

Second, Canon argued that the EC’s decision was contrary to the case law of the EU Court of Justice, which established that a concentration is implemented only when one company acquires control of another, i.e., it has the possibility of exercising decisive influence.

However, according to the GC, it is only clear that a concentration has not taken place if there is no influence at all. Additionally, in this case, being able to decide by exercising the share options entails a certain degree of influence over TMSC. Therefore, it is undeniable that the first step was a partial implementation of the concentration.

Unitary nature of the transactions 

Finally, Canon challenged the conclusion by the EC that the interim transaction and the ultimate transaction constituted a single concentration. The EC had based its conclusion on the following arguments: (i) the interim transaction was only carried out in view of the ultimate transaction; (ii) a holding company was created expressly for implementing the transaction without acquiring formal control; and (iii) Canon assumed the economic risk of the entire transaction from the time of the interim transaction. 

In contrast, based on previous judgments, the GC holds that the interim transaction had a direct functional link with the implementation of the concentration, and thus contributed to the change of control of the target company. The first step of the concentration was necessary for Toshiba to transfer TMSC early for accounting purposes. Since both steps of the concentration share an economic objective and the interim transaction was essential to implement the entire concentration, the GC concludes that the interim transaction and the ultimate transaction together constituted a single concentration.

Consequently, the GC dismissed Canon’s appeal.


This GC judgment, which is in line with previous gun jumping cases, is a major development in the field of merger control, since it deals with a possible breach of the standstill obligation by a concentration subject to authorization and under a two-step transaction structure involving special purpose vehicles. The concentration finally being authorized, as in this case, does not preclude the imposition of significant fines if certain acts have been carried out before obtaining clearance, even if these acts do not constitute, on their own, a change of control. Therefore, certain acts directly and decisively contributing to the change of control of the target company can entail a breach of the standstill obligation.

Although Canon could file an appeal before the EU Court of Justice, this case highlights that companies must be cautious when implementing transactions subject to the authorization of competition authorities. 

June 14, 2022