In January 2013, the German Federal Cartel Office (Bundeskartellamt) fined the head of a food conglomerate for failure to disclose information in a merger notification.

In 2011 the food company Tönnies Holding GmbH u. Co. KG (‘Tönnies Holding’) notified its planned acquisition of slaughtering company Heinz Tummel GmbH & Co. KG (‘Tummel’) to the German Federal Cartel Office (‘FCO’).

The German Act against Restrictions of Competition (‘ARC’) places an obligation on notifying parties to disclose all companies controlled by them. This obligation also applies to any controlling shareholders, meaning that if any shareholder has control over a company involved in the transaction, and also has control over another company, then that shareholder must disclose details of those additional interests.

While Tönnies Holding provided information about its corporate structure, it failed to mention that the individual in ultimate control of Tönnies Holding (Clemens Tönnies) also controlled the zur Muhlen Group, a major food manufacturer. The FCO uncovered this information during its investigation. This information was considered to be material to the substance of the merger that had been notified, and the FCO blocked the deal partly on the basis of Mr. Tönnies’ parallel control of the zur Muhlen Group. The decision is still subject to an appeal before a German court.

Penalty for failure to give complete information

One year after blocking the deal, the FCO decided to impose a fine of €90,000 (approx. US$125,000) on Mr. Tönnies. The fine would have been higher, but the FCO gave Mr Tönnies a 10% reduction for cooperating in settlement proceedings.

Although the imposition of this fine on an individual, as opposed to a company, is notable, it is not the first case in which the FCO has fined an individual for failure to provide information (or for providing misleading information) in the context of a merger notification. Even lawyers who have been instructed by parties to a merger notification have been fined by the FCO for intentionally providing misleading information about the companies that they represented.

Fines for individuals at the EU level

At an EU level, the European Commission (‘Commission’) is also entitled to fine companies and individuals for failing to disclose all required information during the merger notification process, under Article 14 of the EU Merger Regulation (‘EUMR’). The possibility to fine individuals under the EUMR is, however, more limited in scope than the powers held by the German authorities under the ARC. Fines imposed on individuals at an EU level for failure to provide complete information are rare, although there are several examples of fines being imposed on companies for failure to provide full, correct information in merger filings before the Commission.

In comparison to fines imposed on companies by the Commission, the penalty imposed on Mr. Tönnies by the FCO is relatively high; fines imposed by the Commission on companies for failure to provide information or for providing misleading information have been around €50,000 (approx. US$70,000) (see for example the fines imposed by the Commission on Tetra Laval BV in 2004 and on Deutsche BP AG in 2002). However, the Commission can impose a fine of up to 1% of a party’s global annual revenues.

Given the track record of fines for both individuals and companies at national and EU level, the importance of making full and accurate disclosures in merger notification forms is clear. Although financial penalties may be one of the most immediate concerns, failure to provide complete and accurate information, or providing misleading information, may lead to a notification being declared incomplete or the validity of the approval being put in question. At a minimum, it will cause the competition authority to seek more information in order to verify the accuracy of the parties’ submissions and can delay the investigation.