Gun-Jumping

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The Court of Justice of the European Union (the “CJEU”) has upheld the €20 million fine imposed by the European Commission (the “EC”) against Marine Harvest for gun jumping, applying the same rationale as the General Court of the EU (the “GCEU”) (see our previous post here). The EC found that the multinational salmon-farming company had put into effect a concentration in breach of its obligations to give notice of the operation and to suspend its implementation under Articles 4 and 7 of EU Regulation No. 139/2004, on the control of concentrations between undertakings (the EC Merger Regulation).

After acquiring a 48.5% stake in Morpol ASA (“Morpol”) in December 2012, Marine Harvest was obligated under Norwegian law to submit a tender offer for the remaining Morpol shares. The company told the EC that the transaction had already concluded, but that it would not exercise its voting rights in the acquired company until the Commission issued a decision on the matter. On August 9, 2013, after the tender, formal notice of the transaction was given in accordance with Article 7(2) of the Merger Regulation, which provides that when a concentration comes about as a result of a public bid or the acquisition of securities admitted to trading on a market by various sellers, notification of this must be given immediately after completing the transaction.

Appearing before the CJEU, Marine Harvest argued (i) the GCEU had erred in its interpretation of the concept of single concentration, as it had not considered it necessary to analyze the conditional nature between the first transaction carried out in December 2012 to acquire the Morpol shares and the subsequent tender; and (ii) breach of the principle of non bis in idem by the GCEU, contending that it had been fined twice on the same facts.

In its judgment on March 4, the CJEU clarified how these concepts apply:

  • The concept of single concentration

As already confirmed by the CJEU in Case C-633/16 – Ernst & Young, which we reported here, a concentration is understood as performed when the parties “perform operations that contribute to a long-lasting change of the control of the target undertaking”.

The CJEU rejected the appellant’s arguments and affirmed the EC position, holding that the initial acquisition of the 48.5% had already given Marine Harvest exclusive de facto control of Morpol, so completing the merger, without the need for a subsequent public tender.

The undertaking, therefore, would not fall within the exceptions of Article 7(2) of the Merger Regulation.

  • Non bis in idem and concurrent infringements

Marine Harvest contended that the EC had sanctioned it twice for a single infringement and a single conduct: the purchase of shares in December 2012. Consequently, the commission had breached the principle of non bis in idem, and subsidiarily the principle of overlapping infringements, according to which the sanction for the more specific infringement already includes the more general infringement, that should not be sanctioned separately.

Despite acknowledging the clear link between both infringements as the infringement of the obligation to notify constitutes an automatic infringement of the obligation to suspend, the court found that the same would not be true were the situation reversed. This means that even when an undertaking complies with the duty to inform of a concentration before performing it, there is still a possibility that it will be in breach of Article 7(1) of the Merger Regulation, if the undertaking performs the merger before the commission has declared it compatible with the internal market. The CJEU believed that accepting the appellant’s argument would deprive the EC of any possibility to distinguish between the breach of the obligation to suspend (which had been notified) and the breach events for both obligations. This would mean, in practice, that breaching the obligation to notify could never be object of a specific sanction.

Therefore, the CJEU concluded that the obligation to notify and the obligation to suspend the merger are independent obligations until authorization is granted, serving separate functions, and non-compliance with these will produce separate, sanctionable infringements.

It is not the first time that the EC has held the obligation to suspend to be infringed due to a lack of notification. In June last year, the commission sanctioned Canon €28 million for infringing both obligations. In April 2018, the commission sanctioned Altice €124.5 million, on this occasion for having only performed the concentration (after giving due notification) without waiting for authorization.

The sanctioning procedure in Spain differs on this point in as much as that the Spanish Competition Act 15/2007 (in Spanish, “LCD”) does not consider failure to notify and non-compliance with the obligation to suspend as separate infringements. The most recent cases of gun-jumping in which no notification whatsoever was given have been sanctioned by the Spanish National Commission on Markets and Competition (in Spanish, “CNMC”) as a single serious infringement of Article 9 of the LCD. The same happened in Case SNC/DA/093/19 – Nufri Group, where the CNMV imposed a single sanction on the offending undertaking only for non-compliance with the obligation to notify. The same stance was taken in Case SNC/DC/0074/16 – Consenur, which we reported here, and Case SNC/DC/0038/15 – MásMóvil.

In any event, the European and domestic precedents cited draw attention on the importance of being particularly careful in merger transactions, and to bear in mind, in particular at EU level, that the EC may eventually consider a party to have committed a double breach, giving rise to a possible double sanction.

By Mireia Prat y Pablo García

This post is also available in: Español

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Asociada

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mireia.prat@cuatrecasas.com

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pablo.garciavazquez@cuatrecasas.com