When hearing the word ´fine´ in an antitrust context, one usually thinks of cartels. However, fines can also be imposed when infringing procedural obligations, e.g., in merger control proceedings. While fines for gun jumping are more prominent in merger control (see here), there is also a history of fines for not telling the truth (or withholding it). A recent case provides an opportunity to address some developments and risks in this area.
The Kingspan case
In March, the European Commission issued a Statement of Objections to Kingspan for providing incorrect, incomplete and misleading information during a merger investigation. This allegation followed the attempted acquisition of Trimo by Kingspan, which was notified to the Commission in 2021. After the Commission raised concerns with a view to certain building materials markets, the parties abandoned the transaction in April 2022.
But that was not the end of it: The Commission opened an investigation against Kingspan in November 2022, taking the preliminary view that Kingspan provided incorrect, incomplete and misleading information during the merger control proceeding with respect to Kingspan’s internal organisation and on certain “basic facts” which the Commission wanted to use to assess:
- the scope of the relevant product and geographical market;
- the existence of barriers to entry and expansion;
- the importance of innovation; and
- the closeness of the competition between Kingspan and Trimo, and vis-à-vis their competitors.
What is prohibited?
Let´s take a step back and look at the procedural obligations in merger control proceedings. The European Merger Control Regulation prohibits to provide incorrect or misleading information negligently or intentionally. The parties have a duty to “make a full and honest disclosure to the Commission of the facts and circumstances which are relevant for taking a decision on the notified concentration”. This obligation applies regardless of whether the information actually has an impact on the decision.
The duty to tell the truth does not only include the initial merger control filing (and any further submissions), but also responses to requests for information (RFI).
Fines in the (recent) past
In the more recent past, the Commission has imposed heavy fines on companies for providing misleading or incorrect information. The most prominent case is probably Facebook (Meta), where the company was fined EUR 100 million in 2017 for providing misleading information during the takeover of WhatsApp. It was found that Facebook – contrary to what it had told the Commission – already did have the technical possibility to automatically match Facebook and WhatsApp users´ identities and that Facebook’s staff was aware of this possibility. Interestingly, although the misleading information did not have direct impact on the outcome of the clearance decision, the Commission held that the information was nevertheless relevant and fined Facebook anyway.
In 2019, General Electric was fined EUR 52 million in the framework of its planned acquisition of LM Wind for providing incorrect information on its offering of certain wind turbines to potential customers. And in 2021, Sigma-Aldrich was fined EUR 7.5 million for providing misleading information during the investigation regarding the acquisition of Sigma-Aldrich by Merck. The company was found to have committed three infringements, namely providing deliberately or at least negligently, incorrect, or misleading information when describing the remedy package offered during the proceedings and in the replies to two RFIs regarding an innovation project.
The risks and a word of advice
In merger control cases, the companies involved are the only an important source of information for regulators. Getting information from other market participants is not always easy. Regulators must and do rely on the information provided by the parties as a basis for their assessment to a large extent. The Commission is aware of this dependence. This is the reason why it takes tough action where it suspects that information is incorrect or misleading. In relation to the General Electric case, Executive Vice-President Margrethe Vestager stated: “The fine imposed today on General Electric is proof that the Commission takes breaches of the obligation for companies to provide us with correct information very seriously.”
The Commission can fine a company up to 1% of the aggregate worldwide turnover for providing incorrect information, which in itself can be a significant amount. And it can get even worse: Although inaccurate information did not necessarily affect the outcome of the cases described above, the Commission can generally reinvestigate and even revoke merger control clearances in cases the parties provided false or misleading information.
As fining decisions are usually widely covered by the press, they are also likely to damage a company’s reputation. Regulators might also tend to take an even closer look at future merger filings of a past offender. Companies and their legal advisors should therefore review carefully any information handed to antitrust regulators (and regulators in general) prior to submission. This can also include critically scrutinising information from the business and evaluating pre-existing documents (of course without fundamentally distrusting everything and everyone).
As to the Kingspan case, the company can (try to) proof that they did indeed provide information in accordance with the law. I am sure we will hear about the case again.
Photo by Markus Winkler on Unsplash
Antitrustpolitics.com 