Mergers: Commission fines Electrabel 20 million euros for acquiring control of Compagnie Nationale du Rhône without prior Commission approval
European Commission - IP/09/895 10/06/2009
Brussels, 10 th June 2009
The European Commission has decided to impose a fine of 20 million euros on Electrabel, an electricity producer and retailer belonging to the Suez Group (now GDF Suez) for acquiring control of Compagnie Nationale du Rhône (CNR), another electricity producer, without having received prior approval under the EU Merger Regulation. The Commission concluded that the infringement lasted for a significant period and that Electrabel should have been aware of its obligation to receive Commission approval before proceeding with the acquisition. The EU Merger Regulation requires concentrations of a European dimension to be notified to the Commission before their implementation so that the Commission can examine whether a concentration would significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. This is known as the 'standstill obligation'.
Competition Commissioner Neelie Kroes said: "It is essential for effective merger control that companies respect scrupulously the requirement to notify concentrations of a European dimension to the Commission before they are implemented. Implementing a transaction which has not received the clearance foreseen in EU law constitutes a serious breach of the Merger Regulation. Today's decision sends a clear signal that the Commission will not tolerate breaches of this fundamental rule of the EU merger control system."
However, the Commission had left open the precise date at which Electrabel had acquired control of the CNR within the meaning of the Merger Regulation, as this was not a factor in the substantive assessment of the concentration. The Commission has now completed its investigation on this issue and concluded that Electrabel already acquired de facto sole control of CNR in December 2003, i.e. more than four years before the notification.
In particular, by acquiring in December 2003 the shares of CNR held by EDF, the leading electricity producer in France, Electrabel became by far CNR's largest shareholder holding close to 50% of CNR's shares. The Commission's investigation found that due to the wide dispersion of the remaining shares and past attendance rates at CNR's shareholders' meetings, Electrabel enjoyed a stable majority at such meetings.
This was reinforced by other factors, notably the fact that Electrabel was the sole industrial shareholder of CNR and had taken over the role previously held by EDF in the operational management of the power plants and the marketing of electricity of CNR following the commitments given by EDF to obtain clearance of its merger with EnBW (see ).
The Commission therefore found that Electrabel has breached its obligation not to implement its acquisition of control before obtaining the Commission's authorisation, and that the infringement lasted for a significant period of time.
According to the Merger Regulation, the Commission can impose a fine of up to 10% of the aggregated turnover of the companies concerned for this type of infringement.
In setting the amount of the fine, the Commission has taken into account the seriousness of the infringement, the fact that the standstill obligation is a cornerstone of the EU merger control system and the duration of the infringement.
Electrabel is a large company with experience in EU merger procedures and should have known that the 2003 transaction resulted in an acquisition of control requiring notification to the Commission under the EU Merger Regulation.
However in its assessment, the Commission has taken into account the fact that the transaction has not given rise to any competition concerns and that Electrabel subsequently voluntarily informed the Commission of the acquisition of control .