In early 2025, the U.S. Federal Trade Commission ("FTC") imposed a record-breaking fine of USD5.684 million on three oil companies for engaging in 'gun-jumping' – a term used to describe unlawful pre-merger coordination or integration between the parties to a transaction. The message to merging parties is clear: gun-jumping is not only a procedural misstep, it is also a serious legal violation from a competition law perspective, with significant financial, legal, and reputational costs
The aforementioned fine serves as a reminder that the period between considering or negotiating a deal and obtaining the relevant competition law clearances requires that parties conduct themselves in accordance with the strict letter of the law so as not to trigger any gun jumping violations (which can take the form either of implementing a transaction prior to receiving approval from the competition authorities, or implementing a notifiable transaction without having notified it to the competition authorities). Failure to do so carries increased risk in the context of multi-jurisdictional mergers, given that such transactions are subject to the jurisdiction of multiple competition authorities, many of which now have gun jumping firmly on their radar.
While much has been written on the topic of gun-jumping in general, the specific role of pre-closing covenants in triggering such violations remains underexplored, especially in the broader African context, where the merger control landscape is undergoing rapid change. In this article, we explore how interim covenants / undertakings intersect with competition law in Africa and how careful planning is necessary to assist firms in managing their regulatory risk during the pre-closing period.
The rising tide of African merger control enforcement
Over the last two decades, Africa's competition law merger control landscape has undergone rapid institutional development, with national and regional competition authorities emerging and developing across the continent at remarkable speed. For dealmakers and merging parties, understanding "who regulates what and when" is critical to avoid the premature implementation of transactions across all the jurisdictions concerned.
In recent years, countries such as Malawi, Mozambique, Uganda, and Morocco have established or strengthened their merger control regimes. These national developments are taking place alongside regional regimes such as the Common Market for Eastern and Southern Africa ("COMESA"), and the Economic Community of West African States ("ECOWAS"), but in some instances with nuances in the respective policy and legal approaches. Together, all the relevant regulatory regimes that are triggered by a particular transaction form a patchwork of domestic and supranational oversight under which firms must carefully navigate their conduct prior to implementing transactions. On occasion, a divergence or nuance in developmental priorities and interpretations has given rise to jurisdictional uncertainty between regional and domestic competition regulators.
This complexity has important implications for transaction implementation as well as interim conduct. Ambiguities or nuances in guidance may mean that safeguards permissible in one jurisdiction could be viewed as premature implementation in another, increasing the risk of inadvertent gun-jumping.
The fine line between transaction planning and implementation
Gun-jumping typically encompasses two principal scenarios. The first is where transactions are closed without notification to the competition authorities, notwithstanding that the relevant merger thresholds have been triggered. The second scenario arises where integration measures are taken prior to clearance, frequently while review by the competition authorities is still pending. In suspensory merger regimes, both of the aforementioned instances undermine and breach the 'standstill obligation', which requires merger parties to wait until the competition authorities grant approval before effecting or implementing the merger. The reasons for gun jumping vary and may include time pressures, complex or inconsistent jurisdictional rules, eagerness to begin integration, or uncertainty regarding what constitutes a transfer of control.
In many African countries, where competition law enforcement is evolving, regulatory clarity can be scarce. As such, there is a risk that firms may inadvertently trigger gun-jumping, resulting in severe consequences. Gun-jumping can lead to significant sanctions, including administrative fines, and in more serious cases, to divestiture orders, which can erode the value of a transaction altogether. It also carries reputational risks and can damage regulator relationships. This context brings to the fore the critical need to give due attention to pre-closing covenants during transaction planning. Pre-closing covenants are a standard feature of merger agreements. Their purpose is to preserve the value of the target company between signing and closing. However, where covenants are not properly framed or stray into the terrain of providing purchasers with influence or control, they can be viewed as transferring control prematurely to the buyer, triggering gun-jumping violations.
A classic example of a transfer of control would be the acquisition of more than half of a firm's issued share capital. However, in the world of competition law, things are not as simple. If there is one thing that competition authorities are rarely accused of, it is having too narrow a view of what constitutes control. For the regulator, it is not necessarily about who owns the most shares, but rather "who calls the shots" in the boardroom. To further complicate matters, different competition authorities can apply different standards, such as "material influence" and "decisive influence", to assess control. Decisive influence can be likened to holding the steering wheel, while material influence is more like having a persuasive backseat driver. Decisive influence means having the power to determine a company's strategic decisions, such as appointing board members, dictating business policy, or vetoing major investments or mergers. Material influence, on the other hand, is a softer standard; it's the ability to sway key decisions without outright control, like a significant minority shareholder whose vote can tip the balance on crucial resolutions. Accordingly, merging parties need to be mindful that, regardless of the number of shares being acquired, any contractual arrangements or governance rights that confer the ability to shape or determine the conduct of the target can be considered as the transfer of control.
This expansive approach to control is particularly relevant when considering the role of pre-closing covenants in merger transactions. The regulatory concern is not with the existence of covenants per se, but rather whether those covenants allow the acquirer to materially / decisively influence the target's strategic decisions, thereby undermining the independence that merger control regimes seek to preserve during the interim period while the review process is underway.
It is important to note that not all pre-closing activities amount to gun-jumping. Pre-implementation planning falls outside that scope for so long as it does not result in premature control or integration. Pre-implementation planning refers to the legitimate steps that merging parties are permitted to undertake prior to receiving merger clearance. Such steps are often indispensable to facilitating a smooth and efficient transition once the merger has been approved. There is, however, a fine line between lawful pre-implementation planning and unlawful pre-implementation, which constitutes gun-jumping.
Regulators are also interested in the conduct of the seller or target during the interim period. Actions taken to reshape the business for the buyer, such as staff retrenchments, contract re-negotiations, discontinuation of products, or selective divestments, may be interpreted as part of the implementation of the transaction. Where the conduct of the seller appears to align too closely with the acquirer's strategic or post-merger intentions, this could be scrutinised by regulators.
As such, it is imperative for merging parties to carefully consider their conduct, interim period covenants and the transaction planning process from the outset to ensure that all contemplated steps do not offend competition law prescripts.
In the context of multi-jurisdictional transactions, it is therefore essential to ensure that the transaction is not implemented until all merger approvals are obtained from those jurisdictions with mandatory and/or suspensory regimes, unless certain jurisdictions allow for ring-fencing mechanisms to be put in place to allow for implementation of the transaction globally.
Enforcement trends: the cost of gun-jumping
Recent trends in competition law enforcement demonstrate that circumventing merger review processes through gun-jumping is not worth the risk. Competition authorities across the globe have adopted stricter and more aggressive stances on gun-jumping, imposing significant financial penalties to punish offending merging parties and deter other market participants from engaging in gun-jumping.
This is reflected in the record-breaking USD5.6 million fine imposed by the FTC in the United States on three oil companies earlier this year. In this case, the acquiring firm was alleged to have assumed de facto control over the target firm's business, notwithstanding the absence of competition clearance. The conduct that was alleged to constitute gun-jumping included the purchaser being able to control certain business decisions of the target firm taken in the ordinary course; assuming or rejecting the target firm's contractual obligations; accessing competitively sensitive information of the target firm; and participating in the target firm's financial gains and losses. The contractual provisions of the purchase agreement also mandated that the target firm seek approval from the acquiring firm for any expenditures exceeding USD250,000. This threshold, considered relatively low within the oil sector, effectively necessitated the acquiring firm's consent for a significant portion of the target firm's routine operational decisions, including the cessation of new drilling operations, the management of drilling assets, and the approval of employee appointments at the field level. These actions were found to constitute a clear breach of the standstill obligation and resulted in the record penalty.
In Europe, enforcement has similarly intensified. On 9 November 2023, the European Court of Justice largely upheld the European Commission's ("EC") and the General Court of the European Union's ("GC") substantive finding that a telecommunications operator had breached the standstill obligation, and although slightly reduced the fines imposed by each of the EC and GC, ultimately imposed a total fine of EUR115.16 million.
Closer to home, African regulators are also taking a firmer approach. At the close of 2022, the Angolan Competition Regulatory Authority ("CRA") imposed its first penalty for gun-jumping, fining the parties, who are active in oil and gas, close to USD2.4 million. Notably, on 28 January 2024, the President of the CRA further disclosed that the CRA had also imposed a fine of USD4 million in respect of a petroleum sector transaction implemented without prior notification. On 8 July 2024, the Competition Authority of Kenya ("CAK") imposed a fine of over KES17 million for the implementation of a global merger in the construction materials and chemicals space without its approval. The merger, though concluded abroad, was found to trigger notification in Kenya due to an indirect change of control over a Kenyan subsidiary and thus affecting local market operations in the construction chemicals sector. The merger parties self-reported the merger to the CAK in October 2023, five months after the closing of the global deal. These examples confirm that gun-jumping violations are under closer scrutiny, both globally and in Africa, as competition regulators adopt a more assertive stance.
Although enforcement capacity differs across African jurisdictions due to various challenges faced by particular authorities, including resource constraints, cooperation among competition regulators is at an all-time high. Both formal and informal coordination mechanisms are enhancing regulators' abilities to monitor and challenge gun-jumping offences with growing effectiveness. For merging parties, the risk of enforcement is no longer confined to a single jurisdiction; regulators are watching and are in constant contact due to various collaboration initiatives. For instance, a number of regulators on the African continent have entered into Memoranda of Understandings ("MOUs") with each other. The East African Community Competition Authority (although in the early stages of its enforcement journey) has taken meaningful steps to embed itself within the regional competition law framework. Notably, it has entered into MOUs with national authorities, including Rwanda's Inspectorate, Competition and Consumer Protection Authority, and Tanzania's Fair Competition Commission. The COMESA Competition Commission has likewise concluded several Memoranda of Understanding with national authorities across its member states, the most recent of which, with the Tunisian Competition Council, was entered into in 2025.
Conclusion
As African competition authorities become increasingly assertive on the global stage, firms must strike a careful balance between urgent deal execution and robust legal compliance. Gun-jumping is clearly in the crosshairs of competition regulators worldwide. Pre-closing covenants, while essential, must be drafted with precision and supported by rigorous internal compliance frameworks. Firms that take a proactive approach to understanding the regulatory risks of gun-jumping and who structure their transactions with care, can avoid the penalties and reputational harm that come with non-compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
