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Brussels, 12 December 2012
Mergers: Commission welcomes General Court judgment in Electrabel case
The European Commission welcomes today's judgment by the General Court (GC) which fully dismissed Electrabel's appeal of a Commission decision of June 2009 fining Electrabel €20 million for acquiring control over Compagnie Nationale du Rhône without prior approval under the EU Merger Regulation (Case T-332/09). This is the first time that an EU court rules on a Commission decision to impose a fine for implementing a concentration of EU dimension without prior notification to and approval by the Commission. The GC confirmed that such early implementation constitutes a serious breach of EU merger control law. The Court also makes clear that the Commission is entitled to adopt effective and deterrent sanctions in case of such infringements.
Today's judgment reminds companies of their duty not to implement concentrations of an EU dimension before receiving the Commission's approval (the so-called "standstill obligation"). Failure to comply with this requirement carries a risk of significant sanctions.
In a decision of June 2009, the Commission found that the Belgian energy company Electrabel had acquired de facto sole control over the French energy company Compagnie Nationale du Rhône (CNR), without having received prior approval under the EU Merger Regulation (see IP/09/895 and MEMO/09/267). The GC upheld both, the Commission's finding of a breach of the standstill obligation and the €20 million fine that the Commission imposed on Electrabel.
The GC held in particular that the Commission's finding that Electrabel had acquired de facto sole control as of December 2003 was correct. The GC confirmed that a minority shareholder may be considered to hold de facto sole control of a company in the meaning of the EU merger rules for example if the shareholder is virtually certain of obtaining a majority at future general meetings because the remaining shareholders are widely dispersed. The fact that a French law prohibits a private company from holding more than 50% of CNR's shares did not preclude the acquisition of de facto sole control by Electrabel under the EU Merger Regulation. The GC also stressed that an early implementation of a concentration, in violation of EU law, is liable to bring about significant changes in the competition situation and is therefore not a mere formal or procedural infringement. The fact that Electrabel's acquisition of control was ultimately found not to raise any competition issues was not a decisive factor for determining the gravity of the infringement nor was the fact that the infringement was committed through negligence considered sufficient to give rise to a reduction of fine.
The Commission welcomes today's judgment which confirms the Commission's discretion in setting the level of fines under the EU Merger Regulation in accordance with the objectives of its enforcement policy.
In its decision of 10 June 2009 the Commission established that Electrabel acquired de facto sole control over CNR in December 2003 when Electrabel became the largest shareholder of CNR, holding slightly less than 50% of CNR's shares and voting rights. This finding was based on well-established principles from the Commission's decision making practice and guidelines (see the Commission Notice on the concept of concentration of 1998 and the Commission Consolidated Jurisdictional Notice of 2008).
In particular, the Commission found that with the additional shares in CNR it acquired in December 2003, Electrabel was expected to have a stable majority at CNR's shareholders' meetings, due to the wide dispersion of the remaining shares and based on past attendance rates at such meetings. In addition, a shareholders' agreement between Electrabel and CNR's second largest shareholder, Caisse des Dépôts et Consignations, guaranteed Electrabel control of CNR's Board of Directors. Electrabel notified its acquisition of sole control over CNR to the Commission only in 2008, i.e. more than four years after the actual implementation of the concentration.
While the Commission unconditionally cleared the notified transaction, in a separate decision (see IP/08/658), it imposed a fine of €20 million on Electrabel for violation of the standstill obligation.
Under Article 7(1) of the EU Merger Regulation a concentration with an EU dimension may not be implemented before it has been found compatible with the internal market by the Commission. Derogations from this obligation are possible, subject to a party's reasoned request, but are granted in exceptional circumstances. Article 14(2) of the EU Merger Regulation entitles the Commission to impose a fine of up to 10% of a company's turnover for breach of the obligation in Article 7(1). Although the Commission's decision to fine Electrabel was adopted under the previous Merger Regulation (in force at the time Electrabel acquired control), the relevant provisions are substantively similar to those described above.