Reed Smith Client Alerts

A decision adopted on 3 May 20211 by the European Commission (the Commission) serves as a stark reminder that breaches of procedural obligations in merger review cases can lead to non-negligible fines. In particular, breaches of the obligation to provide correct information are treated very seriously in a merger investigation.

Six years after the Commission approved a merger, it has fined one of the parties €7.5 million for failing to disclose information in the context of the Commission’s review of the merger. Although the Commission’s decision to fine the company has no impact on its merger clearance decision, it does clearly show that the Commission will not hesitate to pursue and punish companies for supplying incorrect or misleading information, even if the information did not have an impact on the final merger assessment.

In this case, the information withheld related directly to the scope of a divestment commitment proposed by the parties to address the Commission’s competition concerns with the merger. More specifically, the information withheld concerned an innovation project in the area of R&D closely linked to the business to be divested and the Commission considered that it was withheld to avoid its transfer to the purchaser of the divested business.

Because this innovation project was, by its very nature, secret and confidential, the Commission was particularly reliant on the companies involved to disclose its existence.

This information was further withheld in replies to two specific requests for information sent by the Commission pursuant to article 11 of the EU Merger Regulation. This led the Commission to conclude that there were in fact three distinct infringements of deliberately, or at least negligently, providing incorrect or misleading information: one in the context of describing the scope of the remedy package and two in relation to the two requests for information.

The existence of three breaches of the procedural duty to supply correct information will have had an impact on the calculation of the fine, with the Commission having the power to impose fines of up to 1 per cent of the worldwide group turnover of companies providing incorrect or misleading information.

This is the third time since 20172 that the Commission has used these powers to fine companies for withholding information or providing incorrect or misleading information (in the previous two cases, the Commission imposed even higher fines, of €110 million and €52 million, respectively). It has also in recent years imposed significant fines on companies for the procedural breach of implementing a merger prior to approval (‘gun jumping’), for which the Commission has the power to impose fines of up to 10 per cent of the worldwide group turnover of the parties.3 The Commission’s recent track record in punishing merging parties for disregarding procedural obligations in the EU merger review process is part of a wider global trend of competition authorities reminding businesses of the need to comply with procedural obligations in the merger review process.4