A merger occurs when two or more companies merge together to form a new company. Usually it involves one company acquiring its competitor. During this period, the companies involved in the deal must still act as competitors until the merger has been closed. In other words, the companies can not start strategizing together as though they were one company while the merger deal is still being worked out. They must legally be a single company before they can start acting like one.

"Gun-jumping" occurs when the two companies start strategizing together and no longer act as competitors before the merger has been completed. This is considered a violation of the Sherman Anti-Trust Act and the Hart-Scott-Rodino Act, and the companies who engage in such conduct can be subject to civil penalties and perhaps even criminal antitrust enforcement by the U.S. Department of Justice and the Federal Trade Commission.

What Kind of Conduct Qualifies of Gun-Jumping?

The most obvious example of conduct by merging companies that would qualify as gun-jumping would be anything that would amount to price-fixing. In other words, if the companies start coordinating on what prices will be placed on products offered to customers, or try to plan any type of customer allocation before the merger deal has been closed, this would qualify as gun-jumping and would be a violation of federal law.

While there have been no cases in which acts of companies were qualified as gun-jumping by a federal judge, there have been settlements between companies and the Department of Justice for conduct the DOJ qualified as gun-jumping. Some types of conduct that the DOJ has seen as gun-jumping are:

  • Moving the actual locations of operations of one company to the other companies facilities
  • One company controlling the pricing of the products of the other company
  • One company trying to settle disputes between a union and the other company
  • The merging companies agreeing to shut down competing operations

What Should I Do if My Company Has Been Accused of Gun-Jumping while Merging with Another Business?

If you own a business and have decided to merge with another business, but in the process are accused of gun-jumping by the DOJ or FTC, you should immediately consult an antitrust attorney. Your business attorney will be able to advise you of your company’s options as well as seek out any possible defenses you may have.