The Commission has imposed a €28 million fine on Canon, a Japanese company concentrated on imaging and optical products, for the infringement of the Merger Regulation (EC 139/2004). The so-called “gun jumping” took place in 2016 when Canon was willing to acquire Toshiba Medical System Corporation through an interim buyer. The Commission opened an investigation in 2017 and published a press release regarding the matter on the 27 of June 2019. Canon disagrees with the European Commission’s legal assessment and is willing to appeal the decision in the General Court of the European Union in Luxembourg.
During the past years, the policy on Merger Control has become stricter in the EU. The biggest fine sanctioned by the Commission for the gun jumping was on the Altice, a multinational cable and telecommunications company, which was fined by 124.5 million euros. Moreover, also Facebook had to pay 110 million euros for transmitting misleading information to the Commission according to the acquisition of WhatsApp.
Margrethe Vestager, Commissioner in charge of competition policy, said: “Companies have to respect our Competition rules and procedures. They are obliged to notify and wait for our approval before a merger can go ahead. Canon structured a transaction to circumvent these obligations when they acquired Toshiba Medical System Corporation. This is a procedural breach of our merger review so we are fining Canon 28 million euros. Our merger assessment and decision-making depends on the Commission being sure that companies are not jumping the gun and implementing merger without our approval.”
The procedure of the Merger Control can be complex particularly in the community dimension, when there is a doubt of risking the competition by the acquisition of Companies. Merger falling into EU-scoped criteria requires a Community level control examination. All companies have a duty to inform the Commission of merger or acquisition procedures of this nature.
Merger control has certainly a vast impact for the competition in the European Union. The protection of small and medium companies has gained significance since it is the main source of employment in the territory. Therefore, it is necessary that the Commission must have an opportunity to intervene before any damages in the competition may emerge. Breach of the Regulation can be fined up to 10% of the company’s annual turnover. The gravity and other characters of the breach evaluate this fine. Additionally, the Commission can impose other measures to ensure the compliance.
Canon had breached both the notification requirement (gun jumping) and the standstill requirement of the Merger Regulation. These particular breaches occurred during the examination procedure by a transfer through the interim buyer. Commission stated in the publication from last week that Canon did not comply with the requirements since the transfer for the acquisition through the interim buyer had already been executed without the final confirmation of the eligibility for the acquisition.
Article 4 of the Merger Regulation establishes a requirement that the concentrations with a Community dimension defined in the Regulation shall be notified to the Commission prior to their implementation and following the conclusion of the agreement, the announcement of the public bid, or the acquisition of a controlling interest.
The so-called gun jumping is not explicitly defined in the Regulation. However, it commonly relates to the failure to make a required notification of the acquisition. In fact, Canon noticed the Commission on planning for the acquisition, but the subsequent partial implementation during the ongoing procedure brings the notification requirement in a more vague area in the competition law field. Regarding the recent decision on the subject confirms that every action during the procedure must be brought to the knowledge of the Commission.
The obligation to suspend all acts of concentration before the final declaration of compatibility by Commission is settled in the Article 7 of the Regulation (the standstill obligation). This denotes that it is important to emphasize that the parties in the merger procedures should act completely independent in the markets as long as the decision is not established. The so-called warehousing can therefore cause problems for the actual respect of the Merger control procedure. Warehousing is a two-phased transaction, which allowed Canon to execute a partial implementation through an interim buyer. The interim buyer acquired 95% in the share capital of Toshiba Medical System Corporation for 800 euros, and Canon acquired the remaining 5% for 5.28 billion euros and the options over the interim buyer. This was the first step of the procedure before completely acquiring the TMSC. Doing so without further notification or permission, Canon plead to be responsible for the breach of the provision.
Control of the merger and acquisitions is such a diverse matter in the globalized world and it requires a strict compliance of the procedural obligations set up in the Regulation. As considered before, the Commission had much more flexible approach for the merger and acquisitions of companies and rarely sanctioned from the potential breaches of the rules. However, as a todays’ world requires more attention towards to the competition and market shares, these times are over and today, the companies have a greater responsibility on the cooperation with the Commission.