On 26 October 2017, the General Court issued its judgment in Marine Harvest v. European Commission. The Court upheld the initial decision of the European Commission which imposed a fine of € 20 million on Marine Harvest for gun-jumping.
Background and facts
Marine Harvest is a salmon farming company. In December 2012, Marine Harvest acquired 48.5% of the shares in Morpol, a competitor listed on the Oslo Stock Exchange. In January 2013, Marine Harvest submitted a mandatory public offer for the remaining shares of Morpol, following which Marine Harvest had acquired in March 2013, 87.1% of the company’s share capital. Marine Harvest later acquired all of Morpol’s remaining shares.
Marine Harvest had first contacted the Commission on 21 December 2012. As from December 2012 it had entered into pre-notification discussions and it formally notified the transaction on 9 August 2013. The transaction was cleared by the Commission on 30 September 2013, subject to divestment commitments from Marine Harvest.
On 23 July 2014, the Commission imposed a fine of € 20 million on Marine Harvest for implementing the aforementioned transaction 8 months before formally notifying it to the Commission and over 9 months before getting clearance. This was found to be in breach of both the obligation to notify of Article 4(1) of Regulation No 139/2004 (“EUMR”) and the standstill obligation of Article 7(1) EUMR. According to the Commission, Marine Harvest should have been aware of its obligation to notify the transaction and was therefore considered negligent by implementing the acquisition before the transaction had been cleared. The fact that Marine Harvest had not exercised its voting rights in Morpol until clearance did not exonerate it from the infringements, however it was accepted as a mitigating circumstance.
In its 2014 decision, the Commission considered that Marine Harvest had already acquired de facto sole control of Morpol following closing of the December 2012 private acquisition.
It was highly likely that Marine Harvest would, at that time, achieve a majority at Morpol’s shareholders’ meetings, taking into account the size of its stake (48.5%) and the attendance level of other shareholders at previous shareholders’ meetings. This was not contested by Marine Harvest.
As a consequence however, Marine Harvest had been under the obligation to notify the transaction to the Commission before implementing it, as well as the obligation not to close before getting the green light from the Commission.
In its appeal, Marine Harvest argued i.a. that the transaction of December 2012 could fall under the exception of Article 7(2) EUMR. This article contains an exception to the standstill obligation, allowing the implementation of a public bid or a series of transaction in securities admitted to trading on a market such as a stock exchange under certain conditions. According to Marine Harvest, the acquisition of the 48.5% stake was one of ‘a series of transactions’ together with the public offer. This argument failed however. The Court upheld the Commission’s view that Marine Harvest had already acquired control of Morpol from a single seller, by means of a single transaction in securities, i.e. the acquisition on 18 December 2012.
The Court stated “[w]hile it is true that the complete takeover of Morpol by the applicant took place in several stages and involved various sellers, control was acquired by means of a single transaction and from just one seller, i.e. not from either various sellers or by means of a series of transactions.”
Marine Harvest further alleged the existence of a single concentration and claimed that the December 2012 acquisition and the subsequent public offer formed a unity. In this regard, the Court noted that the concept of ‘single concentration’ relates only to situations in which the change of the market structure (in this case the acquisition of control of a single company) is achieved by various transactions considered together, and not to situations in which such change is realized through a single transaction, as was the case.
The Court holds that that “the concept of a single concentration is not intended to apply in a situation in which sole de facto control of the only target company is acquired from one seller by means of a single initial private transaction, even where it is followed by a mandatory public offer.”
Proportionality of the fine
Marine Harvest further contested the amount of the fines imposed. It contends that it minimised any negative consequences from its infringement by “refraining from exercising its voting rights and keeping Morpol ring-fenced pending clearance by the Commission”.
According to the Court, such measures may have reduced the possible anticompetitive effect, however, they could not remove the risk of damage to competition caused by implementing the concentration before such clearance. The implemented merger could still have impacted the competitive interaction between Marine Harvest and Morpol. The Court cites e.g. the internalisation of a large share of Morpol’s profits and the possible influence on the resignation of the CEO of the former holding companies of Morpol.
The Court in fine rejected the argument that the fines are disproportionate. It stated that the Commission set the fines at the low end of the permitted range, also considering that the fines should be sufficiently deterrent.
Three things one should take away from this judgment:
- The Court confirms the European Commission’s staunch stance against gun-jumping. High fines are imposed, irrespective of the fact that the transaction is ultimately cleared under the merger control procedure.
- The acquisition of a minority shareholding can in specific circumstances lead to an acquisition of de facto control which triggers a merger control notification and which cannot be implemented before obtaining clearance. Determining the exact moment of the acquisition of control can be particularly complex in case of a series of transactions.
- Refraining from exercising voting rights in the target company or ring-fencing the target company will not suffice to undo a gun-jumping infringement.
The full text of the Court’s judgement of 26 October 2017 can be found here.