The competition watchdog has launched its first lawsuit against a company for 'gun jumping' -- here's what that means

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The competition regulator has launched a lawsuit against cell deep freezer Cryosite for alleged cartel behaviour after it entered an asset sale deal with Cell Care Australia.

The ACCC is alleging “gun-jumping” in a suit in the Victorian branch of the Federal Court.

In June last year Cryosite agreed to sell its cord blood and tissue banking business to the only other servicer in the market — Cell Care — and received a $500,000 upfront payment.

The ACCC’s complaint is that the deal required Cryosite to refer all customer enquiries to Cell Care after the agreement was signed but before the acquisition was completed.

It alleges this amounts to cartel conduct because it restricted Cryosite services in that area and allocated potential customers to Cell Care.

Companies must continue to behave as competitors entities even if they’re signed a merger or takeover, before the deal is done.

“Cryosite effectively jumped the gun by referring its customer enquiries to Cell Care before the deal was completed, by ceasing to supply cord blood and tissue banking services to new customers,” ACCC chair Rod Sims said.

“This is the first court action the ACCC has taken in relation to gun jumping conduct. Gun jumping conduct is a concern for competition regulators around the world, who have taken action for similar conduct by merging parties.”

Cryosite says it is “currently considering the ACCC’s proceedings”.

The ACCC also alleges that an ancillary to the sale agreement said Cell Care would not market to Cryosite’s existing customers.

But the deal fell through in January and although Cryosite kept the $500,000, it hasn’t moved back into the cord blood and tissue banking sector.

Stockhead is seeking comment from Cryosite.

This article first appeared at Stockhead, Australia’s leading news source for emerging ASX-listed companies. Read the original here. Follow Stockhead on Facebook or Twitter.

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