On May 18, 2017, the Commission announced it had fined a U.S. company active in social networking, consumer communications and online non-search advertising services for providing incorrect or misleading information during the merger review process related to its acquisition of a consumer communications services provider in 2014.
As already reported (see our publication of February 2017), the Commission sent a Statement of Objections to the same company back in December 2016 and this decision confirms the breach of procedural obligations. Under the EU Merger Regulation (“EUMR”), such breaches may be sanctioned by a fine not exceeding 1% of the company’s aggregate turnover in the last financial year.
During the merger proceedings, the company had denied the possibility of establishing reliable automated matching between the company’s user accounts and the target’s user accounts. However, two years later, the target updated its terms of service, which then allowed for a matching of its and the company’s user accounts. According to the Commission’s investigation, the ability to match users automatically already existed at the time of the acquisition when the company submitted the merger filing to the Commission.
The Commission imposed a fine of €110 million, which it considers to be a “proportionate and deterrent.” This is the first time it has fined a company for providing misleading and false information in the context of a merger proceeding since the entry into force of the 2004 EUMR.
When deciding on the level of the fine, the Commission took into account the fact that the company had committed two infringements, as it had provided incorrect or misleading information both when providing notice of the transaction and when responding to the Commission’s request for information. It also found that the company’s breach was “at least negligent.” The Commission also took into account the fact that the company cooperated with the investigation, which allowed the application of a lower fine.
According to the Commission, the information was only one element among other issues it considered when clearing the transaction in 2014. Accordingly, the Commission’s clearance decision was not affected by the fine imposed.
This case is, nevertheless, a reminder for companies that they need to comply with all obligations during a merger notification process, as violations of the procedural obligations can result in substantial fines. Significantly, the Commission appears to be intensifying its scrutiny of such violations. This is demonstrated by the fact that another U.S. company may be investigated by the Commission for providing misleading information in the context of the merger review of its acquisition of a Danish manufacturer of wind-turbine blades.