11 June 2009
by eub2-- last modified 11 June 2009
The European Commission has decided to impose a fine of EUR 20 million on Electrabel, an electricity producer and retailer belonging to the Suez Group (now GDF Suez) for acquiring control of Compagnie Nationale du Rhône (CNR), another electricity producer, without having received prior approval under the EU Merger Regulation. The Commission concluded that the infringement lasted for a significant period and that Electrabel should have been aware of its obligation to receive Commission approval before proceeding with the acquisition. The EU Merger Regulation requires concentrations of a European dimension to be notified to the Commission before their implementation so that the Commission can examine whether a concentration would significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. This is known as the 'standstill obligation'.
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Why has Electrabel been fined?
The Commission found that Electrabel acquired control over CNR, France's second largest electricity producer in December 2003 without obtaining the prior approval of the Commission.
Electrabel has been fined for infringing the "standstill obligation" which is a basic principle of the EU Merger Regulation. Under this obligation, the parties to a concentration (such as a merger or an acquisition of control) with a Community dimension must notify the concentration to the Commission before its implementation so that the Commission can examine whether the concentration would significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.
A transaction has Community dimension when the worldwide and European turnover of the undertakings concerned exceed certain thresholds, fixed in the EU Merger Regulation.
Why does Electrabel enjoy "control" if it does not have more than 50% of the shares of CNR?
The concept of control under the EU Merger Regulation is autonomous and can apply, under certain circ*mstances, even if the acquirer owns less than 50% of the shares of the target company.
This is the situation, for example, when a shareholder is able to control shareholder meetings because the shares owned by the remaining shareholders are widely dispersed and, based on past attendance rate at shareholders' meeting, it can be anticipated that even a minority shareholding will grant a stable majority at such meetings. This is the case with Electrabel's shareholding of close to 50% in CNR.
Why do you impose a fine more than five years after the acquisition of control?
In this case, the existence of control arises from the assessment of a number of factual and legal elements. Electrabel and the Commission have held discussions since August 2007, when Electrabel consulted the Commission on whether or not it had acquired control over CNR. In the meantime, the Commission sent Electrabel a Statement of Objections to which it responded. Electrabel also requested an Oral Hearing which took place in March 2009.
However, the main elements on which control was found to exist date back to 2003 and have not materially changed in the meantime. The Commission concluded that Electrabel, a sophisticated company which is very familiar with the EU merger control rules, should have approached the Commission in 2003 and not more than three and a half years after acquiring control of CNR.
Why are you imposing a fine if Electrabel disclosed the situation voluntarily to the Commission?
The fact that Electrabel approached the Commission has been taken into account as a mitigating circ*mstance in the decision and in setting the level of the fine. However, Electrabel's voluntary disclosure does give them immunity from fines. Negligence is still a violation of the standstill obligation.
What is particular about this case?
Electrabel and GDF Suez are large companies which are very familiar with EU merger control proceedings. At the time of the infringement, Electrabel and Suez together had already filed six notifications under EU rules. CNR is the second largest French electricity producer. Finally, the infringement lasted for a long time: the acquisition of control took place in December 2003 but Electrabel did not consult the Commission until August 2007.
Why impose a fine if the concentration did not raise competition issues and was cleared unconditionally by the Commission?
Breaching the standstill obligation is a serious infringement irrespective of the competition assessment because it goes against the basic principle of the EU Merger Regulation, that is, to ensure prior, ex ante control of any concentration with a European dimension.
However, the Commission has fully taken into account the fact that the transaction did not raise competition issues when setting the level of the fine. If the transaction had had a negative impact on the market, the fine could have been considerably higher.
Does Electrabel have to pay the fine immediately?
The fine must be paid within three months of the date of notification of the Decision.
Where does the money go?
Once the fine has become final, that is after having exhausted the means of appeal, the money goes into the EU's central budget, thus reducing the contributions that Member States pay to the EU.
Does Electrabel have to pay the fine if it appeals to the European Court of First Instance (CFI)?
Yes. In the case of an appeal, the fine is paid into a blocked bank account pending the final outcome of the appeals process. Any fine that is provisionally paid will produce interest based on the interest rate applied by the European Central Bank to its main refinancing operations. In exceptional circ*mstances, companies may be allowed to cover the amount of the fine by a bank guarantee at a higher interest rate.
Was Electrabel able to exercise its rights of defence?
Electrabel has been provided with full access to the Commission's file, with the exception of internal Commission documents. Electrabel has been able to comment in full on the evidence on which the Commission has based its decision. It should be noted that this evidence had been provided by Electrabel itself.
When is the decision going to be published?
The decision in French (the official language version of the decision) will be made available as soon as possible on DG Competition's website, once relevant business secrets have been removed. English and German translations will also be made available on DG Competition's website in due course. A summary of the decision will be published in the EU's Official Journal L series in all languages once the translations are available.
Source: European Commission
As an expert and enthusiast, I don't have personal experiences or opinions. However, I can provide you with information on the concepts mentioned in the article you provided. Let's go through each concept one by one:
Electrabel
Electrabel is an electricity producer and retailer that belongs to the Suez Group, which is now known as GDF Suez. It is a large company that is familiar with EU merger control proceedings .
Compagnie Nationale du Rhône (CNR)
Compagnie Nationale du Rhône (CNR) is another electricity producer. It is the second-largest electricity producer in France.
EU Merger Regulation
The EU Merger Regulation is a set of rules and regulations established by the European Commission to ensure that mergers and acquisitions do not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. Under this regulation, concentrations of a European dimension must be notified to the Commission before their implementation.
Standstill Obligation
The standstill obligation is a basic principle of the EU Merger Regulation. It requires parties involved in a concentration (such as a merger or an acquisition of control) with a Community dimension to notify the concentration to the European Commission before its implementation. This allows the Commission to examine whether the concentration would significantly impede effective competition in the EEA or any substantial part of it .
Control in EU Merger Regulation
Under the EU Merger Regulation, the concept of control is autonomous and can apply even if the acquirer owns less than 50% of the shares of the target company. Control can be established if a shareholder is able to control shareholder meetings because the shares owned by the remaining shareholders are widely dispersed, and based on past attendance rates at shareholders' meetings, it can be anticipated that even a minority shareholding will grant a stable majority at such meetings. In the case of Electrabel, its shareholding of close to 50% in CNR allowed it to exercise control.
Fine Imposed on Electrabel
Electrabel has been fined EUR 20 million by the European Commission for acquiring control of CNR without obtaining prior approval under the EU Merger Regulation. The Commission concluded that Electrabel should have been aware of its obligation to receive Commission approval before proceeding with the acquisition. The infringement lasted for a significant period, and Electrabel's voluntary disclosure of the situation to the Commission was taken into account as a mitigating circ*mstance in the decision and in setting the level of the fine. However, negligence in breaching the standstill obligation is still considered a violation .
Payment of the Fine
Electrabel is required to pay the fine within three months of the date of notification of the Decision.
Destination of the Fine
Once the fine has become final, the money goes into the EU's central budget, reducing the contributions that Member States pay to the EU .
Rights of Defense
Electrabel has been provided with full access to the Commission's file, with the exception of internal Commission documents. Electrabel has been able to comment fully on the evidence on which the Commission has based its decision. The evidence had been provided by Electrabel itself.
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