On 20 December 2016, the Commission announced it had sent a statement of objections to a U.S. company offering a social networking platform (the “Acquiring Company”), alleging it had intentionally or negligently provided incorrect or misleading information when the Commission was reviewing its acquisition of a consumer communications services provider back in 2014. Under EU competition law, through the statement of objections the Commission informs in writing companies of any competition concerns. Now the Acquiring Company can respond to the Commission’s charge sheet until 31 January 2017.
The merger under review was already cleared by the Commission in October 2014. At the time, the Commission’s investigation of the effects of the transaction had targeted three areas – consumer communications services, social networking services and online advertising services. It found that the transaction did not raise competition concerns and therefore it authorized it unconditionally.
The recent review was prompted by an announcement in August 2016 that it was possible to link the phone numbers of the consumer communications services provider’s users with identities of users of the Acquiring Company. The Commission’s preliminary view is that the technical possibility to match automatically both companies’ users already existed in 2014, contrary to what was stated during the initial merger review process. What is interesting here is that, during the initial investigation, the Commission had concluded that the transaction would not raise competition concerns irrespective of whether the acquirer started collecting data of the target company’s users.
While the Commission’s decision to authorize the transaction unconditionally will still remain in effect, the Acquiring Company faces the possibility of having to pay a significant fine. Under the EU rules applicable to the review of proposed mergers (“EU Merger Regulation”), companies need to comply with certain procedural obligations during the investigation into the transaction. One of these obligations is that they should not, intentionally or negligently, provide incorrect or misleading information. If they do, the EU Merger Regulation provides that the Commission may impose a fine not exceeding 1% of the company’s aggregate turnover.
This case serves as a useful reminder to companies that they should be particularly careful when submitting information to the Commission. They should ensure, in particular, that no misleading or incorrect information is provided during the merger review as, even two years after their transaction is cleared, the Commission will not hesitate to open an investigation which could potentially result in the imposition of significant fines.