TURIN, Italy — PSA Group and Fiat Chrysler Automobiles have officially signaled their intention to merge, but for the next 12 to 14 months, they will have to continue to operate as competitors, analysts and the automakers said.
That is how long it is expected to take to arrive at a final sales and purchase agreement, or S.P.A., and for all antitrust authorities around the world to give their approval.
Respecting any antitrust obligations until the merger is operational is particularly crucial in Europe, where the two companies have most of their activities. EU competition authorities closely watch the automotive sector, and suppliers and automakers have been hit with billions in fines in the past decade for violations.
Hubertus Kleene, an antitrust expert at PricewaterhouseCoopers Legal in Duesseldorf, Germany, said that parties to a transaction that needs to be cleared by an antitrust authority are not allowed to operate together until a clearance decision has been granted — a so-called stand-still obligation. However, they can work on closing documents, Kleene said.
He said that two companies preparing to merge are allowed to:
- Run their companies in “business as usual” mode.
- Communicate jointly to the public investors or news media, but referring to the outstanding clearance decision.
- Prepare for the merger to a limited degree, including information technology integration, assessment of suitability and preparation of interfaces, coordination of new management structure, and planning of new teams below management level.
At the same time, he said, they are forbidden to:
- Cultivate markets jointly.
- Exchange information “extensively.”
- Influence the competitive behavior of the other party.
- Implement the transaction, such as transferring shares or creating a joint or coordinated market presence.
Kleene said that the ban on extensive information exchange is meant to deter flows between the prospective merger partners that are “similar to group internal information.” Such an information exchange could be seen as “jumping the gun” on the merger, he said. Only information related to preparations for the sales and purchase agreement is allowed, he said.
If the two companies wanted to cooperate on a specific operational function before that is signed, they would have to “assess separately whether it is compliant with antitrust law,” he said. They then would have to create a separate agreement, such as a technology transfer contract, a supplier contract or a joint-distribution agreement.
“Infringement of stand-still obligations may lead to substantial fines,” Kleene added.
Violation of EU antitrust rules can bring heavy penalties. In April, the EU said it had fined safety equipment suppliers Autoliv and TRW a total of 368.3 million euros ($405.5 million) for setting up an illegal cartel to supply car seat belts, airbags and steering wheels to Volkswagen. That same month, regulators charged BMW, Daimler, Volkswagen brand, Audi and Porsche with colluding to block the rollout of cleaner emissions technology between 2006 to 2014. The European Commission said the collusion took place during technical meetings held by the so-called Circle of Five.
In May, BMW said it was setting aside more than 1 billion euros for a potential antitrust fine.
