ECJ upholds € 20 million fine on Electrabel for late notification

On 3 July 2014, the European Court of Justice ("ECJ") dismissed Electrabel's final appeal arising from a € 20 million fine for failing to timely notify its 2003 acquisition of control of Compagnie Nationale du Rhone ("CNR") (see VBB on Competition Law, Volume 2012, No. 12, available at www.vbb.com).

In December 2003, Electrabel acquired de facto sole control of CNR by purchasing close to 50% of CNR's shares, in conjunction with other factors that gave Electrabel a powerful role in CNR's operational management and a stable majority at shareholders' meetings. 

In 2007, Electrabel began consultations with the Commission to determine whether it had obtained control, finally submitting a formal notification of the transaction in April 2008.  In part based on the duration of the delay between the acquisition and filing, the Commission fined Electrabel € 20 million for gun-jumping, i.e., implementing a notifiable transaction prior to receiving EU approval.

Electrabel argued before the ECJ that the Commission erred by taking the duration of its infringement into account.  Electrabel claimed that because duration was first expressly introduced in 2004 as a factor to consider in fining, the Commission was illegally giving the 2004 Merger Regulation retroactive application to a 2003 acquisition. To the extent that duration could be considered to affect the "gravity" of the infringement, this would be true only if the infringement had harmed competition for that duration, but the Commission had ultimately cleared the deal and found no competitive harm.

The ECJ held that these arguments were inadmissible, as they were not pleas raised before the General Court, nor did they elaborate on parts of the pleas that were raised.  While Electrabel had indeed contested whether the Commission was right to consider the duration of the infringement to be "considerable", it had not argued that the Commission was not entitled to consider duration as a factor at all.

Electrabel also argued that the Commission had wrongly characterised the acquisition as a continuous infringement, when in fact the infringement was instantaneous upon the acquisition in 2003 and therefore the five-year limitations period had expired before the Commission's 2009 decision.  The Court rejected this argument, noting that the Commission had issued a Request for Information and a Statement of Objections within five years of the acquisition, making its investigation timely regardless of whether the infringement was instantaneous or continuous.

The Electrabel case illustrates the potential severity of fines for failing to obtain clearance for an acquisition before closing.  However, although a similar € 20 million fine was also imposed this July (see VBB on Competition Law, Volume 2014, No. 7, available at www.vbb.com), fines for gun-jumping remain relatively rare.

Commission fines Marine Harvest € 20 million for late notification

On 23 July 2014, the European Commission imposed a € 20 million fine on Marine Harvest for acquiring Morpol without first obtaining merger clearance.  The decision is notably similar in key respects to the 2009 decision fining Electrabel for its delay in notifying its 2003 acquisition of Compagnie Nationale du Rhone (see VBB on Competition Law, Volume 2014, No. 7, available at www.vbb.com).

In December 2012, Norwegian salmon farmer Marine Harvest purchased 48.5% of the shares of rival Norwegian salmon farmer Morpol.  As in the Electrabel case, Marine Harvest's near-50% share gave it a stable majority at shareholder meetings due to the wide dispersion of the remaining shares and low attendance rates at the meetings.  Consequently, it obtained de facto sole control.  However, a formal merger filing to the Commission was not made until August 2013, and the deal was not approved until September 2013.

The Commission fined Marine Harvest € 20 million for implementing the acquisition without first obtaining merger clearance.  It based the fine on several factors, including that Marine Harvest should have known of its obligation to file and that the transaction, as originally implemented, raised serious competition concerns that ultimately required significant remedies to be approved once Marine Harvest finally notified it.  However, the Commission considered the severity of the infringement to be mitigated by the fact that Marine Harvest began pre-notification consultations with the Commission promptly after closing the deal and that it did not exercise the voting rights it had acquired until after clearance.

Importantly, Marine Harvest was fined even though its acquisition of Morpol occurred through a public bid.  Such acquisitions are ordinarily exempt from the requirement to suspend closing until approval is received, provided that the acquirer notifies without delay upon closing and does not exercise its voting rights except to protect its investment – requirements Marine Harvest claims to have met.  However, to qualify for the public bid exception, control must have been acquired "from various sellers", whereas Marine Harvest reportedly purchased its shares from a single shareholder.

It is also notable that, by imposing a fine on Marine Harvest of the same magnitude as the 2009 fine against Electrabel (€ 20 million in each case), the Commission appears to be maintaining a policy of imposing more severe sanctions against gun-jumpers than it had imposed in the past.

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