On 6 July 2017, the European Commission sent three separate Statements of Objections (SO) to Merck and Sigma-Aldrich, General Electric (GE) and Canon for alleged breaches of procedural EU merger rules. The Commission claims Merck /Sigma-Aldrich and GE provided incorrect or misleading information, while Canon allegedly implemented a merger before it was notified and cleared.
Two months ago, the Commission imposed a fine of EUR 110 million on Facebook for providing misleading information during its WhatsApp takeover and issued an SO to Altice for ‘gun jumping’. These developments signal the Commission’s ‘no tolerance approach’ towards companies that violate (procedural) merger rules.
Merck / Sigma-Aldrich
On 6 July 2017, the Commission sent an SO to Merck and Sigma-Aldrich alleging that the companies had provided incorrect or misleading information during Merck’s acquisition of Sigma-Aldrich. The Commission had concerns that the merger would reduce competition for certain laboratory chemicals, but cleared it on June 2015 subject to the divestment of certain Sigma-Aldrich assets. However, the companies omitted important information in the merger filing about an innovation (pipeline) project, which would have otherwise been included in the remedy package. The failure to provide this information impaired the viability and competitiveness of the divested business. In the meantime, Merck agreed to license the relevant technology to Honeywell, the buyer of the divested business, almost one year after the Commission decision.
General Electric / LM Wind
On 11 January 2017, GE notified the Commission of its planned acquisition of LM Wind, a Danish manufacturer of wind-turbine blades. On 2 February, GE withdrew its notification, only to re-notify the same transaction eleven days later. This second notification included new information on a future project, originally omitted from the first notification.
On 6 July 2017, the Commission sent an SO to GE, alleging that the company failed to provide information in the original notification concerning GE’s R&D activities and the development of a specific product. According to the Commission, this omission also influenced its assessment of another transaction in the wind turbine market, the acquisition by Siemens of Gamesa.
Canon / Toshiba Medical Systems
In the SO sent to Canon, the Commission alleged a different violation of the procedural merger rules. Its preliminary conclusion is that Canon ‘jumped the gun’ by implementing its acquisition of Toshiba Medical Systems before it was notified, and subsequently approved by the Commission. According to the Commission, Canon used a two-step process known as ‘warehousing’. An interim buyer first acquired 95% of Toshiba’s share capital for EUR 800, after which Canon paid EUR 5.28 billion for the remaining 5%, including share options which granted Canon the right to purchase the interim buyer’s stake. After the Commission approved the merger, Canon exercised its share options, thereby acquiring 100% of the shares in Toshiba Medical Systems.
Although the Commission’s SOs will not affect the approval of any of the mergers, they could lead to fines of up to 1% of Merck and GE’s annual worldwide turnover, and up to 10% for Canon. Once again, Commissioner Vestager stressed the importance of complying with procedural merger control rules, in particular with the requirement to provide complete and correct information. Companies are required to provide all the information necessary for the Commission to conduct its merger control assessment, including information on the transaction’s potential impact of innovation (i.e. accurate information about future projects or products), which is an increasingly important part of the economy.
Compliments of Stibbe, a member of the EACCNY