Mergers: Commission fines Canon €28 million for partially implementing its acquisition of Toshiba Medical Systems Corporation before notification and merger control approval

canon

(Dollar Gill, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has fined Canon, the Japan-based imaging and optical products manufacturer, €28 million for implementing its acquisition of Toshiba Medical Systems Corporation (TMSC) before notification to and approval by the Commission, in breach of EU Merger control rules.

Commissioner Margrethe Vestager, in charge of competition policy, said: Companies have to respect our competition rules and procedures. They are obliged to notify and wait for our approval before a merger can go ahead. Canon structured a transaction to circumvent these obligations when they acquired TMSC. This is a procedural breach of our merger review so we are fining Canon €28 million. Our merger assessment and decision-making depends on the Commission being sure that companies are not jumping the gun and implementing mergers without our approval.”

EU merger control provides a quick and efficient one-stop shop for companies.

To be able to deliver accurate decisions within tight timelines, the EU merger control system is built on clear procedural rules that companies must fully respect.

EU merger rules require that merging companies notify planned mergers of Union dimension for review by the Commission prior to their implementation (“the notification requirement”) and do not implement them until notified to and cleared by the Commission (“the standstill obligation”). The notification requirement safeguards the Commission’s ability to detect and investigate mergers. The standstill obligation prevents the potentially irreparable negative impact of transactions on the market, pending the outcome of the Commission’s investigation.

On 12 August 2016, Canon notified the Commission of its plan to acquire Toshiba Medical Systems Corporation (“TMSC”) from Toshiba. The transaction was unconditionally cleared by the Commission on 19 September 2016.

For the acquisition, Canon used a so-called “warehousing” two-step transaction structure involving an interim buyer.

As a first step, the interim buyer acquired 95% in the share capital of TMSC for €800, whereas Canon paid €5.28 billion for the remaining 5% of the shares and share options over the interim buyer’s stake. This first step was carried out prior to notification to or approval by the Commission.

As a second step, following approval of the merger by the Commission, Canon exercised its share options, acquiring 100% of the shares of TMSC.

In July 2017, the Commission addressed a Statement of Objections to Canon detailing its concerns that, through the transaction structure put in place for its acquisition of TMSC, Canon had implemented the acquisition before notifying it to the Commission and obtaining approval under EU merger control rules.

In November 2018, the Commission addressed a Supplementary Statement of Objections to Canon, complementing the preliminary view taken in the Statement of Objections and reflecting developments in the case law.

In today’s decision, the Commission confirms its preliminary view that Canon breached the EU Merger Regulation and fines the company €28 million.

In particular, the Commission has concluded that:

  • The first and second steps in the transaction structure formed together a single notifiable merger. The first step contributed to the acquisition of final control over TMSC, which occurred with the second step. In fact, within the structure chosen by the companies, the first step was necessary for Canon to gain control over TMSC.
  • By carrying out the first step, Canon partially implemented its acquisition of TMSC before both the notification and the Commission’s approval. As a result, Canon breached the notification requirement and standstill obligation.

Today’s decision has no impact on the Commission’s decision to authorise the transaction under the EU Merger Regulation. The assessment of the Commission at the time was independent of the facts reproached by the Commission to Canon in today’s decision.

 

The fine

According to the EU Merger Regulation, the Commission can impose fines of up to 10% of the aggregated turnover of companies that intentionally or negligently, breach the notification and/or the standstill obligations.

In setting the amount of a fine, the Commission takes into account the nature, the gravity and duration of the infringement, as well as any mitigating and aggravating circumstances.

Canon breached both the notification requirement and the standstill obligation. The Commission considers that both these infringements are serious because they undermine the effective functioning of the EU merger control system.

Moreover, the Commission considers that Canon was aware of its obligations under the EU Merger Regulation. Therefore, Canon’s breach of procedural obligations was, at least, negligent. The fact that the transaction was cleared unconditionally is also taken into account for the gravity of the infringements.

On the basis of these factors, the Commission concluded that an overall fine amount of €28 million is both proportionate and deterrent.

 

Background

Other merger procedural cases

In April 2019, the Commission imposed a €52 million fine on General Electric for initially providing incorrect information during the investigation of its planned acquisition of LM Wind. This decision had no impact on the Commission’s approval of the transaction under EU merger rules, as this was based on rectified information from the second notification.

In February 2019, the Commission sent a Statement of Objections to Telefónica Deutschland alleging the company breached commitments it offered to secure the Commission’s approval of its acquisition of E-Plus in 2014.This investigation is ongoing.

In April 2018, the Commission imposed a €124.5 million fine on Altice, the multinational cable and telecommunications company based in the Netherlands, for implementing its acquisition of the Portuguese telecommunications operator PT Portugal before notification or approval by the Commission.

In July 2017, the Commission sent a Statement of Objections to Merck and Sigma-Aldrich, alleging they breached EU merger rules by providing incorrect or misleading information in the context of their merger. This investigation is ongoing.

In May 2017, the Commission fined Facebook €110 million for providing incorrect or misleading information during the Commission’s 2014 investigation of its acquisition of WhatsApp. This decision had no impact on the Commission’s October 2014 approval of the transaction under the EU Merger Regulation, since the clearance decision was based on a number of elements going beyond those linked to the incorrect or missing information.

Procedural background

The obligation on companies to notify concentrations with Union dimension to the Commission prior to their implementation is laid out in Article 4(1) of the EU Merger Regulation. This obligation safeguards the Commission’s ability to detect and investigate concentrations.

The standstill obligation, which is set out in Article 7(1) of the Merger Regulation, establishes that concentrations falling within the remit of the Merger Regulation may not be implemented prior to notification to or clearance by the Commission. This obligation prevents the potentially detrimental impact of transactions on the competitive structure of the market, pending the outcome of the Commission investigation.

The ability of the Commission to impose fines in the event of a breach of Articles 4(1) and/or 7(1) is laid out in Article 14(2)(a) and (b) of the EU Merger Regulation.

More information will be available on the competition website, in the Commission’s public case register under the case number M.8179.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

German stock market is not affected by the Greek debt revolution while Athens is running out of time

Merkel had it her way with the refugees & immigrants but can Greece and Turkey deliver?

Summer pause gives time to rethink Eurozone’s problems

UN and partners appeal for $920 million to meet ‘dire needs’ of Rohingya refugees

Future fit: 3 ways fashion can be more sustainable

Better ID card security to curb document fraud

Monday’s Daily Brief: biodiversity and forests, labour and road safety, women’s rights, and fallen UN staff remembered

The European Parliament hemicycle in Strasbourg (Copyright: European Union, 2017 / Source: EC - Audiovisual Service / Photo: Mauro Bottaro)

EU Parliament sends controversial copyright law reform back to discussion

Industrial products: Lifting the last impediments in the EU single market

EU and New Zealand launch trade negotiations

Four major resources for new European young entrepreneurs

Digital development: technology-enabled, but human-centric

This is what the gender pay gap looks like in eight countries

The Stray

Why people with disabilities are your company’s untapped resource

What brands get wrong about China – and how to put it right

Global Talent – Professional Internships

It’s just electronic cigarette, don’t worry?

What next for Europe? Three (completely) different Davos views

UN chief welcomes re-opening of key Gaza border crossing

A silent killer: the impact of a changing climate on health

Japan should reform retirement policies to meet challenge of ageing workforce

Facts and prejudices about work

“No labels for entrepreneurs!”, a young business leader from Italy cries out

Electronic Cigarettes: Are they really as safe as we think?

TTIP’s 11th round major takeaways and the usual “leaked” document

Germany’s strong anti-bribery enforcement against individuals needs to be matched by comparably strong enforcement against companies

UN rights chief slams ‘unconscionable’ US border policy of separating migrant children from parents

Why this city is paying people to move there

The remote doctor, can it ever work?

This new form of currency could transform the way we see money

These are the fastest trains in the world

1 in 4 Africans had to pay a bribe to access public services last year

Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising

On International Youth Day the European Youth Forum calls for true youth participation

Want a fairer society? This economist says he has the answer

Permanent structured cooperation (PESCO) on the table of NATO Defense Ministers amid US concerns

Close to final agreement on the EU Banking Union

3 things to know about India’s space programme

Rising insecurity in Central Africa Republic threatens wider region, Security Council told

EU and Australia launch talks for a broad trade agreement

A Sting Exclusive: “Paris is the moment for climate justice”, Swedish MEP Linnéa Engström claims from Brussels

Parliament toughens its position on banking union

UNICEF warns of ‘lost generation’ of Rohingya youth, one year after Myanmar exodus

Central banking in times of complexity

Climate change: ‘A moral, ethical and economic imperative’ to slow global warming say UN leaders, calling for more action

Draghi’s 2018 compromise: enough money printing to revive inflation and check euro ascent

Nordic noir: The unhappiness epidemic affecting young people in the world’s happiest countries

Trump blocks US warmongers from bombing Iran

Trump ostracized by his party and world elites but still remains in course; how can he do it?

Capital Markets Union: Making it easier for smaller businesses to get financing through capital markets

Further reforms can foster more inclusive labour markets in The Netherlands

Afghanistan: UN ‘unequivocally condemns’ attack in Kabul

MEPs criticise “America first” policy

An economist explains why women are paid less

Madagascar: UN chief commends leaders, State institutions following ‘historic milestone’ election

There is a forgotten solution to climate change that we must invest in – nature

Job vacancy data reveal better prospects for Britain, stagnation in Eurozone

Commission adopts €4 billion investment package for infrastructure projects across 10 Member States

EU fundamental rights under threat in several member states

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s