On 12 December 2012, the European Union General Court threw the book at Belgian energy company Electrabel by upholding a decision by the European Commission (EC) to fine the company €20 million for failure to notify a merger in 2003.
During the course of 2003, Electrabel increased its minority shareholding in Compagnie Nationale de Rhone (CNR) from 17.86% to 49.94%, together with 47.92% of the voting rights. Electrabel did not approach DG Comp about its interest in CNR until 2007, at which point the EC concluded that Electrabel in fact had “decisive influence” and therefore sole control of CNR. Electrabel subsequently notified the acquisition which was cleared by the EC in April 2008.
While the EC did not raise any substantive competition concerns, it did leave open the question of the exact point in time at which Electrabel had acquired sole control of CNR. An investigation was subsequently conducted on this issue and in June 2009, the EC concluded that Electrabel had acquired ‘de facto’ control of CNR in December 2003 by virtue of its ability to exercise absolute majorities at shareholder meetings, based on participation and shareholder voting patterns. In addition, Electrabel had a central role in the operational management of CNR and had majority representation of the board.
After considering all relevant factors and circumstances, such as the size, sophistication of and legal resources available to Electrabel, the EC imposed a fine of €20 million for failing to notify and for completing the acquisition without obtaining prior clearance from the EC.
The General Court has now dismissed the appeal brought by Electrabel and has upheld the EC’s decision to impose the fine. The Court stated that the amount is “appropriate in the circumstances of the case, in light of the gravity and duration of the infringement as established by the commission and of Electrabel’s overall resources”.
The EC’s stance in this matter has strongly affirmed its zero-tolerance approach to breaches of the pre notification (standstill) obligation and serves as the ultimate warning to merger parties that the EC will vigorously pursue breaches. The matter also emphasises the importance of careful assessment of minority acquisitions and whether these in fact result in acquisitions of de facto control, thereby triggering notification requirements.